Completion Report

Project Number: 39127 Grant Number: 0002-SF February 2011

Indonesia: Earthquake and Tsunami Emergency Support Project

CURRENCY EQUIVALENTS

Currency Unit – rupiah (Rp)

At Appraisal At Project Completion (15 March 2005} (1 December 2010)

Rp1.00 = $0.00011 $0.000112 $1.00 = Rp9,370 Rp8,930

ABBREVIATIONS

ADB – Asian Development Bank ARMMA – Assistance for the Restoration of Microenterprise and

Microfinance in Aceh BAPPENAS – Badan Perencanaan Pembanguan Nasional

(National Development Planning Agency) BKRA – Badan Kesinambungan Rekonstruksi Aceh

(Aceh Sustainable Reconstruction Agency) BKRN – Badan Kesinambungan Rekonstruksi Nias

(Nias Sustainable Reconstruction Agency) BPK – Badan Pemeriksa Keuangan (Supreme Audit Agency) BRR – Badan Rehabilitasi dan Rekonstruksi

(Agency for Rehabilitation and Reconstruction) CAP – community action plan CORDAID – Catholic Organization for Relief and Development Aid CSO – civil society organization CWSHP – Community Water Services and Health Project DGH – Directorate General of Highways EA – executing agency DMRR – disaster management rehabilitation and reconstruction DWHH – Deutsche Welthungerhilfe ECR – east coast road EMO – Earthquake and Tsunami Emergency Support Project

management office EMS – Extended Mission to Sumatra ETESP – Earthquake and Tsunami Emergency Support Project FY – fiscal year ha – hectare HELP Hilfe Zur Selbsthilfe e.V HRD – human resource development IOM – International Organization for Migration IA – implementing agency ICT – information and communication technology IEE – initial environmental examination JFPR – Japan Fund for Poverty Reduction km – kilometer KPK – Komisi Pemberentasan Korupsi

(Corruption Prevention Commission) KRR – Krueng Raya road LARAP – land acquisition and resettlement action plan

ABBREVIATIONS LARPFPG – Land Acquisition and Resettlement Policy Framework and

Procedural Guidelines LCB – local competitive bidding LLCB – limited local competitive bidding MDF – Multi-Donor Fund MIF – Microfinance Innovation Fund MMAF – Ministry of Marine and Fisheries MOF – Ministry of Finance MSEs – micro and small enterprises NGO – nongovernment organization PIU – project implementation unit PLN – Perusahaan Listerik Negara (state electricity company) PMO – project management office PMU – project management unit Q – quarter RWSS – rural water supply and sanitation SCADA – supervisory and control data acquisition SERD – Southeast Asia Department SPAR – subproject appraisal report SPEM – spatial planning and environmental management SPM – subprojct manager SPPR – subproject preparation report SUHA – Seismically Upgraded Housing in Nanggroe Aceh Darussalam ULR – Ulee Lheue road UN – United Nations UN-HABITAT – United Nations Human Settlements Programme WUA – water-users association

NOTES

(i) The fiscal year (FY) of the government ends on 31 December. (ii) In this report, "$" refers to US dollars.

Vice President C. Lawrence Greenwood Jr., Operations 2 Director General K. Senga, Southeast Asia Department (SERD) Team leader J. Nugent, Country Director, Indonesia Resident Mission, SERD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page Maps 1 Agriculture Component i2 Fisheries Component ii3 Health Component iii4 Education Component iv5 Rural Water Supply and Sanitation Component v6 Housing Component vi7 Irrigation Component vii8 Village Planning Subcomponent viii9 Subdistrict Planning Subcomponent ix10 District Planning Subcomponent x11 Roads and Bridges Component xi12 Livelihood and Microfinance Component xii BASIC DATA xiii

I. PROJECT DESCRIPTION 1 A. Introduction 1 B. Rationale for the Project 2 C. Objective and Scope 2

II. EVALUATION OF DESIGN AND IMPLEMENTATION 3 A. Relevance of Design and Formulation 3 B. Project Outputs 4 C. Project Costs 6 D. Disbursements 6 E. Project Schedule 6 F. Implementation Arrangements 7 G. Conditions and Covenants 7 H. Consultant Recruitment and Procurement 8 I. Performance of Consultants, Contractors, and Suppliers 8 J. Performance of the Recipient, Executing Agency and Implementing Agencies 9 K. Performance of the Asian Development Bank 9 L. Complementary Activities 10

III. EVALUATION OF PERFORMANCE 11 A. Component Performance 11 B. Relevance 11 C. Effectiveness in Achieving Outcome 11 D. Efficiency in Achieving Outcome and Outputs 12 E. Preliminary Assessment of Sustainability 13 F. Impact 13

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 14 A. Overall Assessment 14 B. Lessons 14 C. Recommendations 15

APPENDIXES 1. Project Framework 16 2. Component Objectives and Subcomponents 21 3. Review of Component Implementation 23 4. Accomplishments of Project Components 40 5. Project Cost and Financing Plan 49 6. Implementation Arrangements, Procurement, and Disbursement 54 7. Project Implementation Schedule 62 8. Organizational Framework for Reconstruction Management 63 9. ADB and Government Interface on Project Management 64 10. Status of Compliance with Covenants 65 11. Status of Consulting Services Contracts 72 12. Summary of Contract Details 73 13. Complementary Activities 77 14. Impacts and Assessments 80 15. Summary Assessment of Component Performance 83 16. Lessons from Project Implementation 88

Supplementary Appendixes (available on request) A. Completion Report for the Agriculture Component B. Completion Report for the Fisheries Component C. Completion Report for the Small and Medium-sized Enterprises Component D. Completion Report for the Education Component E. Completion Report for the Health Component F. Completion Rural Water Supply and Sanitation Component G. Completion Report for the Housing Component H. Completion Report for the Irrigation Component

I. Completion Report for the Spatial Planning and Environmental Management Component

J. Completion Report for the Roads and Bridges Component K. Completion Report for the Power Component L. Completion Report for the Fiduciary Governance Component

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Map 1 Agriculture Component

ii

Map 2 Fisheries Component

iii

Map 3 Health Component

iv

Map 4 Education Component

v

Map 5 Rural Water Supply and Sanitation Component

vi

Map 6 Housing Component

vii

Map 7 Irrigation Component

viii

Map 8 Village Planning Subcomponent

ix

Map 9 Subdistrict Planning Subcomponent

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Map 10 District Planning Subcomponent

xi

Map 11 Roads and Bridges Component

xii

Map 12

Livelihood and Microfinance Component

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BASIC DATA

A. Grant Identification 1. Country 2. Grant Number 3. Project Title

4. Recipient 5. Executing Agency 6. Amount of Grant 7. Project Completion Report Number

Indonesia 0002-INO Earthquake and Tsunami Emergency Support Project Republic of Indonesia Agency for Rehabilitation and Reconstruction (BRR) from grant effectiveness until 16 April 2009 National Development Planning Agency (BAPPENAS) from 16 April 2009 until grant closure $294.5 million inclusive of the Netherlands cofinancing of $3.5 million PCR: INO 1236

B. Grant Data 1. Appraisal – Date Started – Date Completed 2. Grant Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Grant Agreement 5. Date of Grant Effectiveness – In Grant Agreement – Actual – Number of Extensions 6. Closing Date – In Grant Agreement – Actual – Number of Extensions

7 February 2005 15 February 2005 29 March 2005 29 March 2005 7 April 2005 29 April 2005 27 July 2005 21 June 2005 None 30 December 2008 30 December 2010 4

7. Disbursements a. Dates Initial Disbursement

23 September 2005

Final Disbursement To be determined

Time Interval To be determined

Effective Date

21 June 2005

Original Closing Date 30 December 2008 30 December 2010

Time Interval 3 years 6 months 5 years 6 months

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b. Category-wise Disbursement ($ million) Category Original

Allocation Last

Revised Allocationa

Contract Amount

Amount Disbursed

Disbursement Under

Processing Civil works 156.69 149.33 149.36 146.07 3.29 Equipment, materials, and vehicles 38.92 32.63 36.19 35.61 0.58 Microfinance fundsb 15.00 9.50 9.50 9.50 0.00 Studies, surveys, community mobilization, workshop and training, nongovernment organization services 32.21 19.58 19.41 19.07 0.34 Consulting and auditing services 30.88 62.51 52.49 52.49 0.00 Microcredit for house expansionc 3.00 0.00 0.00 0.00 0.00 Project management 16.80 20.95 27.38 26.26 1.12 Total 293.50 294.50 294.33 289.00 5.33 a Inclusive of $1 million additional contribution to the Asian Tsunami Fund from the Government of

Luxembourg approved in October 2006. b Includes microfinance innovation fund. c A separate microcredit facility for housing expansion was not pursued because of limited demand and

complexity of implementation.

c. Cost Breakdown by Project Component ($ million)

Appraisal Actual Project Components Foreign Local Total Foreign Local Total

1. Agriculture 8.53 24.18 32.71 2.08 30.36 32.442. Fisheries 10.00 23.29 33.29 3.10 26.72 29.823. Micro and Small Enterprise 3.73 17.57 21.30 3.00 10.85 13.854. Health 10.20 15.10 25.30 2.17 9.19 11.365. Education and Skills Development 4.80 17.63 22.43 1.93 14.96 16.896. RWSS 0.73 10.75 11.48 0.00 6.17 6.177. Housing 5.18 76.05 81.23 1.25 73.94 75.198. Irrigation 6.72 28.18 34.90 3.56 26.41 29.979. SPEM 5.83 9.63 15.46 9.43 7.58 17.0110. Roads and Bridges 6.40 15.70 22.10 2.29 36.60 38.8911. Power 2.25 8.05 10.30 0.00 9.53 9.5312. Fiduciary Governance 3.85 7.15 11.00 0.51 19.60 20.1113. Other Investment Costs 0.00 0.00 0.00 0.00 25.99 25.99

Total 68.22 253.28 321.50 29.31 297.90 327.21RWSS = rural water supply and sanitation, SPEM = spatial planning and environmental management.

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d. Local Costs (Financed from Asian Tsunami Fund) - Amount ($ million) 265.03 - Percent of Local Costs 87.80 - Percent of Total Cost 79.90 C. Project Data

1. Project Cost ($ million) Cost Appraisal Estimate Actual

Foreign Exchange Cost 68.22 29.31 Local Currency Cost 253.28 297.90 Total 321.50 327.21

2. Financing Plan ($ million) Cost Appraisal Estimate Actual Implementation Costs Recipient Financed 28.00 32.88 ADB Financed 290.00 290.84

Other External Financing (The Netherlands grant)

3.50 3.49

Total 321.50 327.21

ADB = Asian Development Bank. 3. Project Performance Report Ratings

Ratings Implementation Period

Development Objectives

Implementation Progress

From 21 June 2005 to 31 December 2005 Satisfactory Satisfactory From 1 January 2006 to 31 December 2006 Satisfactory Satisfactory From 1 January 2007 to 31 December 2007 Satisfactory Satisfactory From 1 January 2008 to 31 December 2008 Satisfactory Satisfactory From 1 January 2009 to 31 December 2009 Satisfactory Satisfactory From 1 January 2010 to 30 December 2010 Satisfactory Satisfactory

I. PROJECT DESCRIPTION

A. Introduction

1. The catastrophic tsunami and earthquakes that affected the provinces of Aceh and North Sumatra (including the islands of Nias and Simeulue) in December 2004 and March 2005 had devastating impacts on the life and infrastructure of the two provinces. To meet the critical needs of disaster rehabilitation and reconstruction, international aid agencies extended massive financial assistance to add to funding from the Government of Indonesia. Total reconstruction support was $7.2 billion, comprising $5.2 billion in grants from the government and aid agencies, $1.6 billion from nongovernment organizations (NGOs), and $0.4 billion from multilateral and bilateral agencies. Nearly 94% of the performance indicators set in the revised master plan for reconstruction approved by the government in July 2008 have been achieved.1

2. Support from the Asian Development Bank (ADB) for the government’s reconstruction and recovery program comprised (i) a grant of $291 million to the Earthquake and Tsunami Emergency Support Project and a contribution of $10 million to the Multi-Donor Fund (MDF), both financed by the Asian Tsunami Fund (ATF);2 (ii) complementary grants of $28 million;3 and (iii) reprogrammed loans of up to $33 million.4 The support project was approved on 7 April 2005, became effective on 21 June 2005 with an original closing date of 30 December 2008, and was extended until 30 December 2010. The government’s Agency for Rehabilitation and Reconstruction (BRR)—established in April 2005 by presidential decree—was the executing agency (EA) for the project until the termination of its 4-year mandate in April 2009, after which the National Development Planning Agency (BAPPENAS) assumed this role. The line ministries were the implementing agencies (IAs) for their sectors until the BRR assumed this role in 2006.

3. The project, based on a joint needs assessment by BAPPENAS and the international aid community including ADB, 5 helped rebuild affected regions and support their economic revival by restoring livelihoods, essential public services and infrastructure and alleviating constraints caused by the lack of public goods and facilities. The project framework is in Appendix 1.

4. As the emergency project required rapid intervention, subprojects were not identified during appraisal. A sector approach facilitated subproject design based on feasibility studies, discussions with executing and implementing agencies, and community consultations. It also enabled directing assistance to priority areas while ensuring that agreed subproject selection

1 Agency for Rehabilitation and Reconstruction. 2009. Performance Report on the Implementation of the

Rehabilitation and Reconstruction of the Regions and Social Life in NAD and Nias. Jakarta. 2 ADB. 2005. Report and Recommendation of the President to the Board of Directors on Proposed Grants to the

Republic of Indonesia for the Earthquake and Tsunami Emergency Support Project and Contribution to the Multidonor Trust Fund. Manila (The initial Asian Tsunami Fund grant of $290 million was approved on 7 April 2005. On 30 October 2006, the Board approved an increase of $1 million, corresponding to the Government of Luxembourg’s contribution to irrigation projects on Nias Island. R228-06 dated 17 October 2006).

3 The complementary grants comprised (i) $16.5 million from the governments of Canada, the Netherlands and the United Kingdom for the Community Water Services and Health Project (CWSHP)—ADB. 2005. Report and Recommendation of the President to the Board of Directors on Proposed Loans and Emergency Assistance Grant to the Republic of Indonesia for the Community Water Services and Health Project. Manila (Grant 0003-INO) and (ii) $3.5 million from the Government of the Netherlands for strengthening fiduciary governance.

4 ADB originally reprogrammed $65 million in loans, but this was reduced to $33 million following the country portfolio review in May 2007. Less than $15 million has been used for tsunami-related activities.

5 BAPPENAS. 2005. Master Plan for the Rehabilitation and Reconstruction of the Regions and Communities of the Province of Mangrove Aceh Darussalam and the Islands of Nias, Province of North Sumatra. Jakarta.

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criteria were complied with, particularly regarding environmental and social safeguards. ADB also provided four grants from the Japan Fund for Poverty Reduction (JFPR) totaling $4 million that complemented project activities for the livelihood, microfinance and housing components.6

B. Rationale for the Project

5. The earthquakes and tsunami severely hit Indonesia with the loss of 225,000 lives, over 400,000 internally displaced, 20% of the population of Aceh Province rendered homeless, and 20% of the area of Nias Island damaged. The disaster wiped out most infrastructures along the coast, causing the collapse of public services and major losses of private property and livelihoods. On Nias, the earthquake devastated buildings and infrastructure. Restoring normality was essential for pulling people out their trauma. Damaged public infrastructure had to be rehabilitated or rebuilt, and the human and social dimensions of the disaster required concerted efforts to revive livelihoods and restore entire communities. The cost of rehabilitation and reconstruction was estimated at $7 billion. ADB’s support of $320 million made it one of the largest contributors and helped meet a portion of the reconstruction fund requirements. The project constituted an integral and essential part of the government’s reconstruction efforts.

C. Objective and Scope

6. The goal of the project was to help rebuild the affected regions and support their economic revival to meet the Millennium Development Goals. To this end, the economic recovery of affected regions was to be accelerated by restoring livelihoods and essential public services and reconstructing damaged infrastructure. To meet the need for flexible management, the project was designed as a multi-sector grant facility with a sector approach to reconstructing and rehabilitating disaster-affected areas of Aceh and Nias. During implementation, the scope was extended to support associated development on the east and west coasts of Aceh. At the request of the government, project assistance was extended to tsunami-affected conflict areas.

7. The project comprised 12 components in five sector groupings. For livelihood restoration, agriculture and fisheries were rehabilitated and micro and small enterprises (MSEs) were revived. For social services, skills development accompanied health and education facility rehabilitation and reconstruction. For community infrastructure, water and sanitation facilities were provided, irrigation infrastructure was rebuilt, and damaged or lost housing was reconstructed or rehabilitated in an integrated community development framework. For physical infrastructure, damaged roads and bridges were rebuilt; power supplies restored, and sound spatial planning and environmental management (SPEM) systems developed. The fiduciary governance component ensured sound oversight of fund use for reconstruction and facilitated the effective delivery of project assistance. The project not only funded investments in equipment and civil works but also provided substantial consulting support for subproject preparation, implementation supervision, capacity building, and participatory processes in affected communities. Appendix 2 shows component objectives and subcomponents.

6 ADB. 2005. Proposed Grant Assistance to the Republic of Indonesia for the Sustainable Livelihood Development

for Coastal Communities in the Special Province of Mangrove Aceh Darussalam Project. Manila ($2.5 million, approved on 6 September); ADB. 2005. Proposed Grant Assistance to the Republic of Indonesia for the Rehabilitation of Coral Reef and Mangrove Resources in the Special Province of Nanggroe Aceh Darussalam Project. Manila ($1.5 million, approved on 6 September); ADB. 2005. Proposed Grant Assistance to the Republic of Indonesia for Seismically Upgraded Housing in Nanggroe Aceh Darussalam and North Sumatra. Manila ($2 million, approved on 6 September); ADB. 2005. Proposed Grant Assistance to the Republic of Indonesia for the Restoration of Microenterprise and Microfinance in Aceh. Manila ($2 million, approved on 28 November).

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II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

8. Project design and formulation were in line with requirements as determined by the joint needs assessment and consistent with the guiding principles of the project. The project applied a flexible and adaptive sector modality to direct assistance to priority areas and meet evolving needs. Consistent with the ADB policy for emergency operations, subprojects were not finalized at appraisal to allow urgent action.7 Subprojects were selected by the EA and IAs with input from consultants. Subproject preparation for all components was undertaken during 2005–2006 in accordance with eligibility criteria and with substantial technical assistance.8 The Extended Mission to Sumatra (EMS) reviewed and approved project preparation documents in coordination with headquarters staff as necessary. Subprojects were selected on the bases of technical feasibility, cost-effectiveness, and contribution to economic revival in affected regions.

9. Extensive consultations with local government agencies and other stakeholders contributed to formulating sustainable subprojects and facilitated their transfer to the proper agencies. The decentralized approach of the BRR since 2006 shifted operations closer to affected communities to increase stakeholder participation and local government support. Although project grant funds were allocated among the 12 sectors and the different categories, ADB continued to approach component allocation and subproject execution flexibly in line with lessons from implementation, real-time feedback from the field, and economic factors such as inflation. Adjustments to component scope and areas of coverage took into account assistance from other agencies and evolving requirements. ADB maintained extensive dialogue with key government officials and aid agencies to address these issues and overcome implementation difficulties. Regular reviews of component progress with the BRR and BAPPENAS were held throughout implementation, allowing timely joint decisions on (i) adjustments in the allocation of several components and categories, (ii) changes in the scope and geographical focus to redirect assistance, and (iii) confirming the focus and emphasis of the program for the 12 components.

10. The project focus was based on ongoing ADB involvement in Indonesia, the joint needs assessment, and government requests, particularly for extending support to conflict areas and natural resource conservation and management not envisaged at appraisal. The project’s magnitude, complex design, multisector approach, and emphasis on environmental and social safeguards posed implementation challenges. The issues affecting implementation included (i) the need to designs numerous subprojects, (ii) limited capacity in the BRR and IAs, (iii) a complex government budgeting process and delays in approving annual budgets, (iv) delays in annual appointments or reappointments of project implementing units (PIUs) and subproject managers (SPMs), (v) the newly appointed EA’s lack of familiarity with ADB’s safeguard requirements and procurement procedures, and (vi) delays in submitting procurement documentation required for reviewing and processing withdrawal applications. Other factors that led to extended implementation were the changing priorities of the IAs, delayed execution of contracts, scarcity of materials, and logistical problems.

7 ADB. 2004. Disaster and Emergency Assistance Policy. Manila; ADB. 2004. Operations Manual. D7/BP and

D7/OP: Disaster and Emergency Assistance. Manila. 8 A two-stage approval process was adopted to ensure that all subprojects financed from grant proceeds complied

with ADB policy and safeguard requirements. The review process was initiated by a subproject appraisal report (SPAR) including rapid environmental assessment and initial poverty and social assessment. Upon approval of the SPAR, a subproject preparation report (SPPR) was prepared. The SPPR contained all project information including the initial environmental examination and land acquisition and resettlement action plan or community action plan.

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11. The magnitude of the reconstruction program and the wide range of agencies involved, including international finance institutions, NGOs, and government agencies, posed challenges, as did the limited resources of the BRR. ADB addressed these constraints by (i) strengthening the project preparation and implementation capability of the BRR and the IAs and (ii) providing flexibility in designing and implementing subprojects. Decisions on subproject scope were made under difficult circumstances, including (i) no time for full evaluation because of the project’s emergency nature, (ii) government overloaded with urgent undertakings, and (iii) the large number and diversity of agencies trying to provide meaningful support without duplication.

12. As implementation progressed and better information on actual needs became available, the actual scope and costs of the subprojects became more defined and detailed designs were completed. Major changes in scope and cost increases necessitated adjustments in allocation among the components for housing, roads and bridges, small and micro enterprises, education, health, RWSS, and fiduciary governance. Expanded scope and implementation delays required several extensions of the grant closing date to enable full disbursement, complete subprojects and capacity building, and administratively close the project. Despite delays, components have been completed successfully and satisfactorily. Project performance reports summarize the progress of different works and confirm that grant covenants were achieved, though with delays.

13. The project, as envisaged at appraisal and as actually implemented, conformed to ADB’s Disaster and Emergency Assistance Policy (footnote 7). It was consistent with ADB’s operational strategy for Indonesia to (i) promote pro-poor, sustainable economic growth and enhance social development, focusing on improved infrastructure and infrastructure services; (ii) strengthen environmental and natural resource management; and (iii) ensure good governance in operations.9 The project and complementary JFPR grants supported livelihood rehabilitation and rehabilitated damaged infrastructure. The rehabilitated facilities enabled beneficiaries to resume normal lives by restoring basic services and income-generating opportunities.

B. Project Outputs

14. Subproject identification was finalized during implementation in line with selection criteria and approval procedures agreed at appraisal because of the project’s emergency nature. Some components required redesign and adjusted scope to take into account government priorities, funder preferences, institutional constraints and other considerations, including inflation. The implementation of the 12 components is reviewed in Appendix 3 and summarized in Appendix 4. Supplementary appendixes A–L are component completion reports.

15. The component outputs are briefly outlined below: (i) Agriculture. Nearly 23,400 hectares (ha) of farmland slightly-to-moderately

damaged were cleared, inputs were provided, and farming was restored. Drainage improvements and equipment such as hand tractors and threshers and water pumps for 18,500 ha were provided and farming was restored.

(ii) Fisheries. This component restored livelihoods for more than 23,700 fishers and fish farmers, traders, and sellers. Fishponds covering 3,000 ha were rehabilitated and 51 hatcheries rebuilt.

(iii) Micro and small enterprises. A livelihood fund of nearly $1 million provided one-time grants through an international NGO for 6,000 microenterprises to restart operations. A microfinance innovation fund of $8.5 million was set up to

9 ADB. 2003. Country Strategy and Program Update: Indonesia, 2004–2006. Manila.

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provide market-based financing for partner financial institutions to expand grants to micro, small, and medium-sized enterprises.

(iv) Health. Eleven health centers in Aceh and Nias were constructed. Incinerators for the disposal of medical waste were installed in 10 district hospitals.

(v) Education. In all 23 districts in Aceh and both districts in Nias, 375 senior secondary schools used block grants to (i) buy teaching and learning materials, (ii) buy book shelving, (iii) obtain library computers and peripherals, and (iv) undertake minor library repair. New classrooms for 50 schools and the Sabang model school were constructed and given computer and lab equipment.

(vi) Rural water supply and sanitation. Water supply and communal sanitation facilities were constructed in more than 244 communities in Aceh and Nias.

(vii) Housing. Nearly 6,000 new houses were constructed and another 1,400 houses were rehabilitated.

(viii) Irrigation. Ninety-two irrigation schemes with a potential command area of 58,000 ha were undertaken in Aceh and Nias. About 11,400 ha of severely affected irrigated farmland on the west coast of Aceh and on Nias were rehabilitated. In addition, 19,000 ha of irrigated farmland that was slightly damaged and/or in conflict-affected areas was rehabilitated.

(ix) Spatial planning and environmental management. Sixty-three subdistrict action plans identifying core infrastructure, livelihood, and environmental needs in affected subdistricts on the west coast of Aceh and the islands of Simeulue and Nias have been completed. Plans for developing nearly 80 villages, focusing on remote areas along the west and east coasts of Aceh, have been completed. Support for an information system for forest management was provided.

(x) Roads and bridges. The rehabilitation of 75 kilometers (km) of roads, mainly along the east coast in Aceh and in Banda Aceh city and its vicinity, was completed. The component will improve road transportation over 450 km.

(xi) Power. This component contributed to restoring electricity in Aceh by repairing damaged infrastructure and rehabilitating the Perusahaan Listerik Negara service building. Regional coverage added medium-voltage lines in Lhokseumawe and Sabulussalam districts, in addition to Banda Aceh, Meulaboh, and Pidie.

(xii) Fiduciary governance. Besides supporting provincial and regional supervisory board offices, regional offices and the headquarters of the Supreme Audit Agency (BPK) and the Corruption Prevention Commission (KPK), the project financed Banda Aceh's Special Treasury Office.

16. Community empowerment. Community participation and empowerment were integral to the project design and implementation strategy. The project channeled over $40 million in six components—agriculture, fisheries, irrigation, housing, RWSS, and education—directly into communities through traditional community organizations such as farmer and fisher groups, traditional Aceh associations or NGOs, water-user groups, and independent self-help groups (particularly of women, school committees, and housing clusters). Project activities were faciliated by directly recruited village facilitators and collaboration with NGOs. These activities used participatory group planning and phased community contract disbursement based on verified results. This community-driven method has many advantages over deploying contractors: higher construction quality at lower cost, flexibility in implementation, more use of local designs, reduced fund leakage, immediate local employment, more opportunities for women to participate, greater ownership, and strengthened sustainability. The large number of community contracts in many components shows that communities both participated in the project and actually implemented many activities. The experience empowered many community organizations to actively participate in the longer-term development of Aceh and Nias.

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C. Project Costs

17. The cost of the project as implemented was $327.21 million, as detailed in Appendix 5. ADB financed $290.84 million from the ATF grant including the $1 million grant Luxembourg provided in October 2006 (footnote 2), the Government of the Netherlands financed $3.5 million, and the Government of Indonesia provided $32.88 million to finance part of the civil works cost and to cover taxes and regular administration.

D. Disbursements

18. As timely disbursement and efficient fund flow were essential for effective emergency assistance, the Ministry of Finance established a special treasury office in Aceh supported by a grant from project, which dealt with payments not only from ADB but also from other agencies without own-treasury features, such as multilateral, bilateral, and government agencies. This helped make timely payments against eligible expenditures to meet emergency needs.

19. Project design provided for the procurement of goods, services, and works following simplified and expedient procedures in accordance with ADB’s Disaster and Emergency Assistance Policy (footnote 7) and Procurement Guidelines (2010, as amended from time to time). A project imprest account was established for disbursing funds from ADB in addition to direct disbursement. The initial disbursement of $29 million was made in September 2005, a few months after grant effectiveness in June 2005. The imprest account ceiling was raised to $44 million in January 2007 to expedite disbursement, thereby exceeding the 10% ceiling normally allowed for loan projects. However, fund disbursement substantially lagged behind utilization because contract document submission was delayed for various reasons, notably inexperience with procurement matters. The government had to prefinance substantial amounts to cover expenditures that exceeded disbursement. More details on disbursement are in Appendix 6.

20. ADB allowed retroactive financing of 30% of the grant to procure equipment, rehabilitate infrastructure and facilities, and provide services and grants. Eligible expenditures incurred under the project before grant effectiveness but not prior to 5 January 2005 could be reimbursed. However, the government decided not to use the facility as it was unsure it could furnish supporting documentation that would conform to ADB’s procurement guidelines. Also, the BRR would not endorse claims for retroactive financing that were not incurred under its supervision.

E. Project Schedule

21. The project was to be completed in 3 years from the date of Board approval, or by 30 June 2008, and grant closing was expected by 30 December 2008. Considering the scale and complexity of the project, this schedule was unrealistic. The short time for preparation meant there were no detailed feasibility studies or predesigns, as would be done in normal project preparation. As such, the original schedule could be considered only as indicative.

22. Maintaining the original schedule proved difficult for a variety of reasons relating to the complexity of the Aceh–Nias environment, including serious capacity constraints in all parties, primarily the BRR but also the EMS, contractors, NGOs, and consultants. Complex planning and approval procedures in ADB; demand–supply imbalances, particularly in 2006 and 2007 resulting from the loss of skilled personnel to the tsunami; and the physical and cultural isolation of subproject locations, particularly on Nias and Simeulue, contributed to the delay.

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23. The completion date was extended four times to 30 December 2010 to enable full disbursement of grant funds and project closure. The project’s emphasis moved from immediate rehabilitation to sustainable reconstruction. Extensions reflected the need for more time to complete long-gestation infrastructure subprojects, the commencement of some subprojects late in the project period, and the difficulty of designing and implementing many subprojects spread out over a large geographic area and a wide range of sectors. Compared with regular projects, a 5-year implementation period for a multisector project costing $327 million may still be considered relatively short. The actual implementation schedule is in Appendix 7.

F. Implementation Arrangements

24. In January 2005, within 1 month after the tsunami, the government adopted a long-term framework for rehabilitating and reconstructing the affected regions and communities (footnote 5). The National Coordination Board for Disaster Management, headed by the Indonesian vice president’s office, coordinated emergency rescue and relief efforts until the BRR was established in April 2005 for coordination and management. The organization chart of the BRR in the government hierarchy is in Appendix 8. Appendix 9 outlines arrangements for coordinating ADB and the government regarding project policies and programs, internal processing arrangements among government agencies, and implementation management.

25. ADB introduced innovation in the administration of the grant by delegating authority to the field mission. Project administration was initially monitored by Southeast Asia sector divisions from headquarters in Manila. The EMS was established in May 2005 and became operational in July 2005 with offices in Medan and Banda Aceh. These offices were closed in May 2008 and June 2009, respectively. The EMS was headed by ADB professional staff who oversaw the work effectively with support from a team of international and national advisors. Placing the EMS in the affected region was appropriate because of the urgency of rehabilitation and reconstruction and the multitude of demands that needed to be attended to promptly. The Indonesia Resident Mission supervised project implementation from July 2009.

G. Conditions and Covenants

26. The grant agreement provided for wide-ranging covenants on (i) subproject selection and approval; (ii) environmental and social safeguards, including resettlement; (iii) governance and transparency in the use of grant proceeds; (iv) project and component management; (v) progress reporting; and (vi) auditing. These covenants have largely been complied with. Grant transactions, together with reconstruction transactions funded by other stakeholders, were regularly uploaded to the website of the Special Treasury Office established in Banda Aceh with project support. Procedures for subproject approval and implementation were agreed with the BRR and followed. Regular community consultation was a major feature of most activities under the project. A mechanism to review and resolve grievances functioned satisfactorily. Appendix 10 shows that covenants have been generally complied with.

27. Audited statements on expenditures funded from grant proceeds were available in February 2007 for FY2005, December 2007 for FY2006, December 2008 for FY2007, and February 2010 for FY2008. The audit report for FY2009 was however not submitted until project completion. The submission of audit reports for 2005 was delayed because the BRR needed to consolidate its grant expenditures with those of its IAs, and also by ADB on behalf of the BRR for consultants engaged by ADB and payments for such off-budget project partners as NGOs and international organizations. The difficulty of producing a consolidated audit report covering

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all expenditures prompted the amendment of the grant agreement in January 2008 to clarify that the recipient would furnish audit reports covering only on-budget expenditures made by its agencies, while ADB would furnish audit reports on off-budget expenditures it made. As the BPK was having difficulty providing audit reports within the 6-month period specified in the grant agreement, an amendment extended the submission period from 6 to 9 months, but the BPK could still not comply with this covenant in a timely manner.

H. Consultant Recruitment and Procurement

28. It was recognized at appraisal that expeditiously selecting and mobilizing consultants would be key to timely and effective execution. In accordance with the grant agreement, ADB engaged all international and domestic consultants following its Guidelines on the Use of Consultants (2010, as amended from time to time) to help government agencies plan, design, and implement the project. Streamlined procedures for tsunami operations introduced in February 2005 under the Disaster and Emergency Assistance Policy (footnote 7) facilitated ADB’s early engagement and mobilization of consultants. 10 These procedures introduced several flexible, simplified modalities for consultant selection including the direct selection of all individual consultants, single-source selection of firms already active in the area, adjustment in thresholds and reduction in proposal submission periods for different types of contracts, and delegation of authority to the resident mission. The most significant adjustments were the use of bio-data proposals for consulting services contracts up to $2 million with a proposal submission period of 21 days, and simplified technical proposal for consulting service packages of more than $2 million with a proposal submission period of 28 days. These arrangements facilitated the engagement of many consulting firms in a relatively short period. ADB engaged more than 35 firms through nearly 50 contracts and more than 40 individual consultants to assist in capacity building and project management. A summary of consultant contracts is in Appendix 11. A summary of civil works and other contracts is in Appendix 12.

I. Performance of Consultants, Contractors, and Suppliers

29. Consultants. As the EAs and IAs could not manage the 12 components of the project, more consultants were required than envisaged at appraisal. The issue was exacerbated by the BRR being new and inexperienced as an EA and assuming the IA role from more experienced line ministries at the beginning of 2006. Under the modified implementation arrangements, consultants made major contributions to designing and implementing all components, often working under difficult conditions with little support or guidance from government agencies. All consultants worked closely with the EMS, particularly in developing concepts, plans, designs, and tender documents; evaluating bids; preparing bid-evaluation reports; and supervising construction. The EMS provided a forum of regular consultation for consultant teams on implementation matters for all components and coordinated policy advice and guidance on common implementation issues such as budgeting and resource allocation.

30. ADB undertook consultant recruitment for all components efficiently. That most teams and individuals were mobilized by September 2005 was key to efficient and expeditious project implementation. Delays in processing numerous variations to meet expanding consultancy needs affected several components, notably fisheries, education, health, and irrigation. Mobilizing additional staff resources expedited the processing of variations from 2008 onwards.

10 ADB. 2005. Asian Development Bank Assistance for Tsunami-Affected Developing Member Countries. Manila.

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31. Contractors and suppliers. Procurement was rated partly satisfactory for most components involving construction, including fisheries, health, housing, irrigation, power, roads and bridges, and RWSS. Despite poor ratings, procurement performance was better than that of most grant projects in Indonesia. On-budget procurement by government IAs was lengthy and inflexible, though the BRR made major efforts to promote flexibility. Contractor performance under most components was generally satisfactory. Most civil works were high quality, but many were completed behind schedule because of delays in releasing counterpart funds and/or technical problems such as design change during execution, sometimes to modify dysfunctional works. Some difficulties and problems in properly executing civil works contracts caused cost and time overruns. For the roads and bridges component and the irrigation component, performance acceptable to poor because of the (i) limited number of capable contractors bidding for a wide range of sectors and projects, (ii) shortage and high cost of construction materials such as timber and cement, (iii) involvement of ex-combatants, and (iv) shortage of working capital. Some contracts were left incomplete by contractors and completed by engaging other contractors. In contrast, community contracts were almost all successful, comparing favorably with contracts filled using local competitive bidding. The education component reported success with its block grant system that promoted ownership by schools. However, the performance of the off-budget contractors—NGOs and other partners on housing construction—was only partly successful because the main purpose of expediting housing construction could not be achieved on schedule and, indeed, took longer than on-budget contracts for similar activities. However, they helped housing construction in remote areas.

J. Performance of the Recipient, Executing Agency and Implementing Agencies

32. Overall, the performance of government agencies—the Ministry of Finance (MOF) as the recipient, the BRR and BAPPENAS as the EA, and line ministries as IAs—was generally satisfactory considering the institutional constraints and limitations within which they had to operate. The success of the project owed much the government’s sustained commitment to the effective delivery of reconstruction programs and other initiatives for improving livelihoods and social infrastructure. The performance of the recipient, EA, and IAs was generally satisfactory. Problems were encountered in 2005 with implementation through national line ministries that were envisaged in the grant agreement to be IAs. Delays arose from government staff shortages and unclear understanding of the role of ADB in the Aceh and Nias reconstruction program. The BRR took considerable time organizing itself as the EA. The government was overwhelmed by the extent of the damage and the many international and national agencies that responded. In the initial stages of the project, MOF arranged establishing the imprest account and special treasury office in Banda Aceh. The performance of the treasury office in disbursing and tracking all reconstruction funds, not just project-related ones, was commendable and earned MOF a national award. MOF’s performance in processing withdrawal and disbursement documents was reasonable and satisfactory. MOF also prefinanced a substantial portion of project disbursements to ensure their timely completion.

K. Performance of the Asian Development Bank

33. The project was prepared and approved in less than 4 months following the tsunami, with Board approval on 7 April 2005. ADB’s Disaster and Emergency Assistance Policy (footnote 7) was effective in getting financial assistance approved quickly and shortened the time frame of ADB’s processing and approval of consultants and contractors. As envisaged at appraisal, the EMS was responsible for managing, administering, and implementing the project,

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working closely with the BRR, its project management office (PMO), and other government agencies to structure and implement the subprojects.

34. As the emergency assistance moved into detailed planning, design, and implementation, the nature of infrastructure restoration after the disaster, and the magnitude of ADB assistance, required an approach different to the upgrading and expanding of infrastructure under normal loan projects. Besides adopting a sector lending modality, ADB decentralized decision making by establishing the EMS within 3 months of grant approval, simplified subproject preparation and approval while maintaining environmental and social safeguards, and delegated review and approval authority to the EMS. Fully operational by June 2005, the EMS was overseen by the country director of the Indonesia Resident Mission, staffed by ADB professionals, and supported by a team of international and national advisors with expertise in project management and safeguards issues. Component oversight was devolved to the EMS gradually, beginning in late 2005. By the end 2006, 8 of 12 components were delegated, and by 2007 the number increased to 11, with 1 component administered by the resident mission in tandem with the complementary CWSHP (footnote 3).

35. ADB management and support was considered highly satisfactory by all components and government agencies. The shift to local management in the extended mission was viewed highly positively by most government agencies, NGOs, and aid agencies, allowing close relations to develop with the EA and IAs and rapid and effective decision making. ADB was highly effective in allocating resources, monitoring implementation, and providing follow-up. Other innovations that greatly improved implementation were (i) post review of procurement contracts, (ii) ADB’s engagement of design and implementation consultants, (iii) adjusted thresholds and ceilings for procurement modalities to expedite contract awards, and (iv) the adoption of off-budget modalities for engaging NGOs and other private sector partners for housing construction. There was close communication, both formal and informal, among ADB, the BRR, BAPPENAS, and MOF concerning the procurement review, issuance of procurement contract summary sheets, and processing of withdrawal applications. The PMO and ADB were able to jointly manage and replenish 16,000 transactions for more than 6,000 contracts during the 5-year implementation period. BRR management was highly appreciative of ADB’s decentralized administration of the project and cited it among 10 major lessons for large-scale disaster management.11 Some beneficiaries compared ADB’s performance favorably with that of some other multilateral agencies, including the MDF.12 ADB management guidance, from the early stages of tsunami response through field visits and support from the Southeast Asia Regional Management Team, greatly facilitated implementation supervision by the extended and resident missions.

L. Complementary Activities

36. Four tsunami-related projects financed by the JFPR and amounting to $8 million were implemented in conjunction with project (footnote 6) besides making a contribution of $10 million to the MDF (footnote 2). These complementary activities and those relating to development partner coordination are summarized in Appendix 13.

11 BRR. 2009. 10 Management Lessons for Host Governments Coordinating Disaster Reconstruction. Jakarta. 12 For instance, the mid-term review of the operations of MDF noted that “it would be useful to evaluate the

experience of the ADB….[W]hy did a traditionally conservative organization like the ADB allow full decentralization of authority and ex-post review of contract awards? And why have only $5 million of the $300 million in contracts been disallowed ….” World Bank. 2009. MDF Mid Term Review, Phase 2: Implications for the World Bank. Jakarta.

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III. EVALUATION OF PERFORMANCE

A. Component Performance

37. Appendix 14 summarizes project impacts, including those relating to environmental and social safeguards. Appendix 15 provides an assessment component performance and rates a several component design and implementation factors. Most factors were satisfactory (Table 1).

Table 1: Assessment of Component Performance

Sector & Component Relevance Effectiveness Efficiency Sustainability Score Overall Rating

A. Livelihood Support 1. Agriculture 3 3 3 2 2.8 HS 2. Fisheries 3 2 2 2 2.2 S 3. MSE 2 2 2 2 2.0 S

B. Social Services 4. Health 2 2 2 2 2.0 S 5. Education 3 3 2 2 2.5 S

C. Community Infrastructure 6. RWSS 1 1 2 3 1.7 S 7. Housing 3 3 2 3 2.7 HS 8. Irrigation 3 2 1 2 1.9 S

D. Physical Infrastructure 9. SPEM 2 2 2 1 1.8 S 10. Roads and bridges 2 2 1 2 1.7 S 11. Power 3 3 2 2 2.5 S

E. Fiduciary Oversight 3 2 2 2 2.2 S Average (unweighted) 2.5 2.3 1.9 2.2 2.2 S HS = highly satisfactory, MSE = micro and small enterprises, RWSS = rural water supply and sanitation, S= satisfactory, SPEM = spatial planning and environmental management. Source: Asian Development Bank.

B. Relevance

38. The project was highly relevant at the time of design, shortly after the earthquakes and tsunami. It was designed to meet the requirements of tsunami recovery as determined by the joint damage, loss, and needs assessment and as requested by the government. ADB assistance was designed in line with the government’s master plan for rehabilitation and reconstruction that was prepared in 2005 and revised in 2008. Accordingly, the initial design had policy interventions in several areas that could be addressed through normal operations and not emergency assistance. The sector modality allowed flexibility to modify, eliminate, or enhance design aspects, or expand the scope or area of coverage, based on emerging needs. With strong support for economic, service, and infrastructure development during latter stages, it remained highly relevant at completion.

C. Effectiveness in Achieving Outcome

39. The project is rated highly effective in achieving its objective of rebuilding earthquake- and tsunami-affected regions and restoring economic activity and livelihoods to meet the Millennium Development Goals. The project’s emergency nature meant the sector approach targeted works to achieve this outcome that were substantially different from those envisaged at appraisal. Adjustments were necessary to respond to evolving circumstances and the realities of planning and design in an emergency. Component design was generally satisfactory. The

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power component was effectively integrated with the overall reconstruction program and fully involved the electricity authority. Conversely, the health component did not adequately involve local government authorities. Some SPEM subcomponent designs were overoptimistic and did not reflect realities. Only two components, agriculture and fisheries, had design and monitoring frameworks. The decision to implement half the housing program off-budget through NGOs and other partners turned out to be very positive in restoring housing and community infrastructure.

D. Efficiency in Achieving Outcome and Outputs

40. The project is rated efficient, which, in the complex and difficult environment of post-tsunami Aceh and Nias, is a credit to the IAs and project teams. All components were efficient, apart from the RWSS and the roads and bridges components, which were less efficient, and agriculture, which was highly efficient, having been comprehensive and completed on time and on budget. Much of the fishery component was on budget, with most of the community contracts issued this way and covering a wide range of restoration and rehabilitation activities. The MSE component enabled the creation of a revolving fund and provided financial resources to participating institutions even beyond the project period, with assets growing over time.

41. The health component is rated efficient, as all construction was completed to contract specifications. The health component’s objective of a sustainable, quality health system may have been more efficiently achieved by focusing on isolated project locations. In education, government-prescribed block grant funding ensured that resources were disbursed effectively and expeditiously and significantly promoted community participation in component activities.

42. The irrigation component is rated efficient. Process efficiency was moderate, as planning, design, tendering, and contracting were protracted. However, component completion with little delay and within budget was significantly better than most other ADB-funded irrigation projects in Indonesia. The housing component was efficient as compared with comparator housing reconstruction support programs of the government and other agencies. The power component is also rated efficient, its implementation being close to on schedule and within allocation, and all subprojects being completed in accordance with design specifications.

43. The implementation of the fiduciary governance component was efficient for its most essential aspect concerning the timely authorization and release of payments for various on-treasury activities and the overall management of project implementation. However, several SPEM subcomponents and the RWSS component were less efficient as they lacked clear focus and, in the case of SPEM, suffered major delays and cost overruns.

44. Several internal factors affected implementation efficiency. The project was a new experience for ADB, entailing direct involvement in a major government-coordinated emergency reconstruction operation. Many BRR and PIU staff considered ADB support to be on the same basis as that of other international partners that both funded and implemented projects—a view exacerbated by misunderstanding of the role and responsibilities of the component consultants. These issues were reflected in relatively low ownership displayed by IAs, and limited knowledge of and commitment by the PIUs and SPMs regarding their responsibilities. This necessitated protracted consultation and negotiation before procedures were agreed. The problems were partly ameliorated by consultant support and strengthened project management support during implementation. Overall, the project is considered efficient. ADB’s Disaster and Emergency Assistance Policy (footnote 7) does not require stringent cost recovery. In view of this, no cost–benefit analysis was undertaken at appraisal or upon completion.

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E. Preliminary Assessment of Sustainability

45. The project and all its components are considered likely sustainable. As sustainability depends on continued support services and budget, all components had capacity building and funding investment projects to ensure sustainability. Provincial and local governments have confirmed their readiness to provide continued budget for operation and maintenance. Yet, sustainability could be challenging. The institutional structure that closely held together the reconstruction program was left with a bureaucratic vacuum when the BRR mandate ended, as original sponsors could no longer be champions for the subprojects funded under the project.

46. Most subprojects were carried out largely on budget using implementation processes familiar to provincial and local government institutions, which were also involved in detailed project design and implementation. Much effort was made to use these mechanisms to develop relationships with stakeholders and communities. Capacity in support services and local government institutions was strengthened significantly by rebuilding and reequipping offices. The government must ensure that funds to sustain systems, buildings, facilities, and equipment will come from central and provincial governments through normal budgetary processes, particularly for the social and infrastructure components. Housing and related infrastructure is likely sustainable, as beneficiaries own the land and housing. The participatory creation of these assets shows that beneficiaries can maintain and improve their homes. The SME and fiduciary governance components will be sustained by the continued operation of the Microfinance Innovation Fund and local government financing institutions.

F. Impact

47. The project has substantially contributed to sustainable economic growth by minimizing the long-term impact of the tsunami. The main purpose of the project was to help rebuild the affected regions and support their economic revival. Subprojects were selected on the basis of technical feasibility, cost-effectiveness, and contribution to economic revival, and they brought significant direct benefits to affected people. Livelihood components provided immediate opportunities in agriculture and fisheries. Support for restoring housing assets had economic and social benefits. By providing essential public services and rebuilding social and physical infrastructure, the project had major direct and indirect impacts on economic revival.

48. The project has been convincingly pro-poor. By contributing to economic revival and livelihood restoration and involving affected communities in planning and implementing recovery and community-rebuilding programs, the project largely achieved its objective. Each subproject was taken up after the preparation of community action plans or, in several infrastructure projects, resettlement action plans to properly address community concerns.

49. The project aimed to ensure greater transparency, accountability, and community participation at all stages of subproject selection, formulation, and implementation. It substantially benefitted participating communities, significantly increasing genuine participation in local planning and development. Further, the fiduciary governance component helped design a system to efficiently monitor the disbursement of the reconstruction funds.

50. Partly due to rehabilitated and upgraded infrastructure and support facilities, agriculture has achieved production significantly above pre-disaster levels. In the areas on the west coast of Aceh more severely affected, communities are well on their way to full recovery, resuming traditional agricultural activities following the restoration of village housing and infrastructure.

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Progress is being made in rebuilding social structures with the influx of new residents as relatives return and newcomers arrive under voluntary post-conflict resettlement. Similar progress has been made in restoring communities and agricultural production in severely earthquake-affected rural communities on Nias, restoring economic stability and growth. Support for MSEs addressed the primary need of poor and low-income households by enhancing their access to responsive financial institutions. Improvements to schools and their management will provide sound bases for providing learning environments that meet national standards, with an emphasis on the practical application of science and information and communication technology. Model health centers now have the infrastructure to provide appropriate and affordable community health services. The drawing up of clear development strategies for villages and districts will have impact on poverty reduction and local income by prioritizing infrastructure projects and contributing to economically efficient land use.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

51. The overall assessment of the project is successful. It helped mitigate the adverse impacts of the earthquakes and tsunami of 2004 and 2005. As implemented, the project succeeded in achieving its objectives despite its being formulated in a very short time. It met the government’s objectives for recovery from the tsunami. It closely followed ADB’s country strategy and policies for extending emergency assistance to rehabilitate and reconstruct affected regions. As such, the project was timely, highly relevant, effective, efficient, and likely sustainable, and had the full support of the government. It was implemented flexibly with a sector approach that enabled adjustments where needed. Considering the project’s magnitude and extent and the need for project design in compliance with ADB requirements, the 2-year extension was essential and justified to complete all activities under the adjusted scope.

52. Because of the exigencies of the disaster situation that required quick response, detailed subproject design and implementation arrangements were not fully developed at the outset. Nevertheless, the government and ADB decided to proceed with the emergency assistance on the basis of a broad framework for project preparation and implementation before detailed guidelines and procedures were established. While this may be a risky strategy, it was driven by the urgent need to mitigate the crisis by providing poor communities with immediate relief.

53. The government and EA performance was generally satisfactory. After initial difficulties, arrangements agreed at appraisal were modified with ADB’s agreement, following which the PMO successfully assumed the coordinating role, while project implementation and monitoring were more appropriately done through the EMS because of institutional weakness in the BRR.

B. Lessons

54. Key lessons from the project are the following, with details in Appendix 16: (i) Disaster management support should be based on a needs assessment that

should identify and address such implementation problems as the lack of government staff, regulations, or design standards for various physical works.

(ii) Reconstruction support should be selective and adopt a realistic time frame, with ADB focusing on areas that are unlikely to receive support from other partners.

(iii) Phasing of reconstruction assistance may be considered, clearly distinguishing the needs of initial emergency response from those of subsequent reconstruction.

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(iv) Proper institutional arrangements and central coordination by one agency are essential. The effectiveness of post-disaster reconstruction depends on the willingness and collaboration of relevant government agencies.

(v) Off-budget activities may expedite implementation as on-budget implementation ensures sustainability by establishing an extensive outreach program and building capacity for future reconstruction programs.

(vi) Flexibility in implementation is essential, as it facilitates the design of need-based reconstruction projects through simplified documentation.

(vii) Decentralization is essential in effective disaster management. Adapting to emerging needs is desirable in disaster reconstruction.

C. Recommendations

55. When supporting emergency assistance, focusing attention on selected priority areas or sectors instead of spreading it across many should enable the achievement of optimal results. Component and subcomponent design should clearly state objectives to avoid ambiguity. Flexibility should be provided to allow adjustments in scope and content in a dynamic situation.

56. ADB should avoid being drawn into emergency relief operations for which other agencies are better qualified or integrating substantial development and restructuring support with emergency response.

57. Sector operation appears to be the preferred approach to quickly delivering ADB assistance if the country has the institutional capability to effectively use flexibility to direct support to where it is needed. ADB may evaluate the government’s staff resources realistically and provide consulting support as required. Government requests for additional support should be thoroughly scrutinized to ensure that the objective of disaster mitigation can be sustained.

58. Implementation requirements, including oversight, monitoring, and reporting requirements, should be reviewed and discussed with the government. ADB and the government should balance the use of available government officers, international consultants, and local consultants to ensure all requirements are covered and proper budget allocations are included upfront, prior to the commencement of implementation. Placing an ADB office that is properly staffed and adequately funded, and has the requisite flexibility and decision-making authority, should be considered from the start.

59. ADB should review its time frame for completing emergency assistance following major disasters. Project experience suggests that a 3-year time frame for such substantive support is too short, considering uncertainties in project design and staffing. The government’s capacity to provide counterpart support must be considered in scheduling. Rapid emergency rehabilitation and reconstruction must be balanced with ensuring that projects are well designed and major works properly constructed.

60. ADB and the government should be flexible and supportive in evaluating requests for minor changes in scope, as such changes are logical considering the rushed nature of planning, design, and tendering of works under emergency grants. Off-budget contracting arrangements, including community contracts and block grants, can successfully channel reconstruction funds directly to targeted beneficiaries. However, ADB should ensure that the government has proper arrangements in place to generate sufficient funds to operate and maintain the new facilities.

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance Targets and Indicators in Original Design

Achievements

Goal and Impact Aceh and North Sumatra affected regions economically revived

Agriculture and fisheries production restored by mid-2008

Restoring damaged physical and community infrastructure vital to economic activity to an improved standard has benefited affected communities and minimized the tsunami’s impact. By the end December 2008, 64,000 hectares (ha) of agricultural land had been rehabilitated and brought back into production through the project and other programs, 7,100 boats were delivered to replace a high percentage of lost fishing vessels, and 17,400 ha of fishponds were rehabilitated out of a total of 20,000 ha. The agriculture sector (including fisheries) registered growth of over 4% since 2006.

Private sector activities become the main component of economic activity in affected areas by mid- 2007

Community empowerment, small and microenterprises, and support services led to increased private sector involvement in economic activities.

Average household incomes at half pre- disaster level by mid-2008

This appears to have been achieved in most tsunami-affected areas as a result of the project and complementary support from external and government agencies and nongovernment organizations (NGOs). Poverty incidence in Aceh declined from 28.4% of the population in 2004 to 23.5% in 2009, while in Nias it increased from 62% in 2003 to 67% in 2009. Growth in agriculture has contributed to the decline in poverty.

Monitoring mechanisms Provincial statistics and monitoring systems

General information was collected and monitored through the provincial planning and other agencies supported by the National Development Planning Agency (BAPPENAS).

Outcome Livelihoods, private economic activity, and essential public services and infrastructure restored

Employment opportunities for one person in every household by the end of 2006

Unemployment has declined since 2007 but remains a major challenge at 9.3%, similar to the pre-tsunami level. By the end of 2006, 69% of males and more than 25% of females in the labor force were employed. The share of people of working age employed did not change significantly between 2003 and 2006.

Full enrolment of school children by the end of 2007

Reconstructed and rehabilitated schools with replenished supplies and equipment increased enrolment in affected areas. By December 2008, 962 permanent schools were built or repaired and more than 39,000 teachers were trained. By 2006, rates of elementary school enrolment had generally recovered.

Water-borne diseases reduced by mid-2008

Secure water supply and sanitation facilities in affected rural villages improved health care and reduced the incidence of disease. By December 2008, access to safe water had improved significantly in urban areas and districts in the north of Aceh, while other areas in Aceh and Nias lagged behind.

Appendix 1 17

Design Summary Performance Targets and Indicators in Original Design

Achievements

Viable transport enterprises operating by the end of 2006

Essential public transport services have been restored with improved infrastructure. The successful peace process that followed the 2006 agreement between the government and the Free Aceh Movement contributed to this improvement.

Monitoring mechanisms Provincial statistical sources and project performance monitoring system

Subproject preparation documents provide baseline information for performance monitoring, which was mainly undertaken by advisors to the project management office (PMO) of the Extended Mission to Sumatra (EMS). The government did not conduct a post-project survey, but brief review and analysis was done in connection with assessment of component completion.

Assumptions and risks Assumption Adequate and timely availability of funds and coordination of activities among stakeholders

The availability of required funding was ensured through the government budgeting process coordinated by the Agency for Rehabilitation and Reconstruction (BRR) and BAPPENAS with the support of the Ministry of Finance’s Special Treasury Office in Banda Aceh funded under the project.

Risk Lack of confidence in future demand of householders and enterprises

Involvement of communities in the planning and implementation activities addressed these concerns.

Outputs Private Economic Activities Restored

Livelihood Support 1.1 Agricultural and fishery production in the affected areas restored

Farming and estate crops restored on 20,000 hectares (ha) of less-affected land by mid-2008 Farming resumed on 6,000 ha of moderately and 5,000 ha of severely affected land by mid-2008

Over 23,381 ha of slightly and moderately damaged farmlands have been cleared, inputs have been provided, and farming restored. 90,000 meters of tertiary canals have been rehabilitated for over 1,000 ha of damaged irrigation lands. Drainage improvements and equipment were provided to restore farming on 18,500 ha of land.

Fishponds on 3,000 ha restored to pre- tsunami levels and 13,000 small-scale fishers resume fishing by the end of 2007

2,900 ha of fishponds were rehabilitated and 51 hatcheries rebuilt. More than 23,700 fishersand fish farmers, traders, and sellers were helped in resuming their livelihoods.

Assumptions and risks Assumption Farmers and fisher folk intent to return to previous livelihoods. Risk Lack of supply chain for equipment and inputs

Most farmers and fishers resumed their livelihoods. Extension and support centers rehabilitated under the project provide the required advice and support.

1.2 Commercial and community-based financial institutions to provide for the financing needs of viable micro, small, and medium-sized enterprises

Sustainable rural development banks and community-based microfinance institutions to restore full set of financial services

One-time grants totaling $1 million were provided to 6,000 microenterprises to restart their operations. Technical assistance was provided to eight private rural banks in Aceh and one regional bank in Nias on the Grameen lending approach, serving more than 5,000 clients. Twelve government-owned rural banks restructured into one bank with 12 branches, and its management capability was strengthened.

1.3 New financial institutions through the Microfinance

Three new microfinance institutions able to provide long-term grants and equity

The MIF was set up in April 2006 to provide market-based financing for partner financial

18 Appendix 1

Design Summary Performance Targets and Indicators in Original Design

Achievements

Innovation Fund (MIF) financing to viable small and medium enterprises by the end of 2006

institutions and extend grants to micro, small, and medium-sized enterprises. A total of $8.5 million was disbursed as grants, deposits, and quasi equity to 9 rural and 2 commercial banks.

Assumptions and risks

Assumption Effective demand for commercial credit Risk Subsidized credit scheme undermines commercial operations.

Demand for microcredit has been considerable, as demonstrated by the full disbursement of the MIF and complementary funds from the Japan Fund for Poverty Reduction grant for microfinance.

Restoration of Public Services and Infrastructure

Social Services 2.1 Restored and improved basic health care

Fifteen primary health-care facilities restored by mid-2008

Eleven primary health-care facilities were restored, five in Aceh and six in Nias

2.2 Enhanced capacity for district health management

Three district hospitals re-equipped by mid-2008

Skill enhancement and capacity building was undertaken for 729 nurses and 60 doctors.

Assumptions and risks Assumption Government receptive to strengthening capacity for decentralized management of health care Risk No change in health-seeking behavior and unavailability of medicines

Local governments are being given responsibility for health services, with budgetary support for the continued operation and maintenance of the installed facilities.

2.3 Rehabilitation and reconstruction of education physical facilities 2.4 Education staff and managers’ capacity enhanced

Improving quality of teaching and quality of learning in junior and secondary schools

Supplies of teaching and learning materials were replenished and library facilities were upgraded at 395 senior secondary schools. Practical science and laboratory facilities were upgraded in 54 new or reconstructed schools. Training programs were undertaken for 400 education personnel.

Assumptions and risks Assumptions. Staff are available and willing to take posts in remote areas Adequate payment for trained labor

Besides continued budgetary support, capacity building was undertaken through the component will help sustain school activities.

Community Infrastructure 2.5 Rural water supply and sanitation systems with repairable damage restored

At least 200 systems with secure water supply and sanitation facilities by mid-2008

Water supply and communal sanitation facilities were constructed for more than 244 communities in Aceh and Nias.

Assumptions and risks Assumption Those affected participate and make decisions. Risk Community disagreement with proposed restoration

All activities under this component were formulated and executed through active community participation and stakeholder consultation.

2.6 Affordable housing for communities and households restored and modernized

At least 10,000 housing units rehabilitated by the end of 2007 14,000 housing units constructed by mid-2008.

Only 6,000 new houses could be constructed by 2009, and 1,400 houses rehabilitated, because of rising costs.

Assumptions and risks Risks Lack of agreement on landownership rights Possible environmental consequences of demand for timber products

Issues concerning landownership were addressed through community consultation. All housing construction complied with applicable environmental regulations. Shortages of lumber affected the timeliness of construction but did not have an adverse impact on the environment.

Appendix 1 19

Design Summary Performance Targets and Indicators in Original Design

Achievements

2.7 Irrigated agricultural farming systems restored

Farm output at pre-tsunami levels on 20,600 ha of irrigated farmland by mid-2008

About 11,400 ha of severely affected irrigated farmland on the west coast of Aceh and Nias were rehabilitated.

Farm activities to be resumed on 12,000 ha of tsunami-affected irrigated farmland by mid- 2008

Farming on 11,400 ha of tsunami-affected areas resumed by 2009.

Assumptions and risks Assumption Rice production remains profitable. Risk Rehabilitation work insufficient to restore viability of systems

Rehabilitation of agricultural land will ensure profitable crop production. Rehabilitation works signed and executed with community involvement will ensure system viability.

Physical Infrastructure 2.8 Government capacity for spatial analysis and planning established

Decision-support systems for land-use available by end-2005 Spatial planning outputs for rehabilitation and reconstruction program by the end of 2005 Strategic environmental elements in reconstruction addressed by mid-2005

The major outputs include (i) 62 village plans focusing on more remote areas along the west and east coast of Aceh; (ii) 63 subdistrict action plans identifying core infrastructure, livelihood and environmental needs of affected subdistricts on the west coast of Aceh and the islands of Simeulue and Nias; (iii) development plans for districts on the east coast of Aceh; (iv) legislation to conserve and manage natural resources; and (v) an information system for forest management.

Minimized impacts on environment during reconstruction phase

Environmental sensitivity mapping was carried out to support rehabilitation and reconstruction. In addition, environmental impact assessments of the subprojects funded under different components were undertaken.

Assumption and risks Assumptions Readiness of communities to participate with sufficiently trained community facilitators Adequate coordination among various levels of government and with stakeholders Risk Inadequate delegation of planning functions

The preparation of village, spatial, and infrastructure-development plans was undertaken with the participation of local communities. Local governments have been delegated authority for formulating infrastructure planning and executing a coordinated approach. However, spatial planning could not be completed in time to support planned reconstruction efforts in areasof need.

2.9 Road access and services in affected areas restored

About 115 kilometer (km) of roads and bridges reconstructed by mid-2008 Transport charges for users decline

The rehabilitation of 75 km of roads, mainly along the east coast in Aceh and in Banda Aceh and its vicinity, was undertaken, improving road transportation on over 450 km.

Assumptions and risks Restoration at adequate and higher quality for traffic generation and flow Definition of alignments delayed

The volume and quality of traffic flow have increased. Initial delay in defining scope helped better subproject preparation, though construction took longer than expected for various reasons, including contractor inefficiency and lack of materials.

2.10 Power distribution networks and connections in Banda Aceh, Meulobah, Sigli and Bireuen regions rehabilitated

31circuit-kilometers of medium-voltage lines; 1,294 circuit-kilometers of low-voltage lines; and 35 megavolt-ampere medium- and low-voltage distribution stations by the end of 2007

The reestablishment of electric supply in Aceh was completed in 2008 with an expanded scope that added medium-voltage lines in Lhokseumawe and Sabulussalam districts in addition to Banda Aceh, Meulaboh, and Pidie.

Assumptions and risks Risk Spatial planning takes longer than projected.

The restoration of the power network followed existing alignments.

20 Appendix 1

Design Summary Performance Targets and Indicators in Original Design

Achievements

Fiduciary Oversight and Governance

2.11 Capacity of Supreme Audit Institution (BPK) and directors general of Treasury funds connecting system enhanced

At least 50 staffers trained Institutional strengthening of staff at BPK headquarters and the Banda Aceh office was supported. The Special Treasury Office was established in Banda Aceh and Nias.

2.12 Provincial treasuries and audit systems reestablished and enhanced

Funds and equipment provided to the regional supervisory agencies to restart operations at the province and district level

2.13 Effectiveness of Corruption Prevention Commission (KPK) in Indonesia effectiveness enhanced

Capacity-building support was provided to KPK’s Aceh office until 2008.

2.14 Government project management capacity established 2.15 Provincial Millennium Development Goal monitoring system established

Project management staff in place in districts and provinces by mid-2005 Monitoring system for activities and results established by mid-2005

Project management offices were established in the EMS of the Asian Development Bank, then in the BRR, and subsequently in BAPPENAS after the BRR mandate ended in April 2009.

Assumptions and risks Assumption Central and provincial sanctions established and operative Risks Failure to coordinate flow of funds to and from province Failure to adopt anticorruption measures Peace and security not maintained

Provincial audit agencies became operative, and flow of funds was monitored effectively by the Special Treasury Office. Reasonable anticorruption measures were taken. The peace process since mid-2005 helped the reconstruction and rehabilitation efforts supported by agencies and the project.

MILESTONES Grant agreement finalized: 30 March 2005 Board approval: 7 April 2005 Grant effectiveness: 21 June 2005 Start of consultant services: May 2005 End of period of retroactive financing claims: January 2006 Project completion: 30 September 2010

Inputs Grants totaling $291 million from the Asian Tsunami Fund Cofinancing of $3.5 million Government contribution of taxes and land acquisition costs equivalent to $32.88 million Livelihood support: $76.09 million Social services: $28.43 million Community infrastructure: $111.49 million Physical infrastructure: $59.39 million Fiduciary oversight and governance: $19.11 million

Appendix 2 21

COMPONENT OBJECTIVES AND SUBCOMPONENTS

Objectives Subcomponents Livelihoods Restoration Agriculture (i) Facilitate economic revival in the agriculture sector in affected regions by restoring rural livelihoods. (ii) Alleviate constraints resulting from the lack of public goods and facilities by restoring essential agricultural services and rebuilding infrastructure.

(i) Restoration of farming, mainly lowland rice, goats, and on estates abandoned because of conflict, with farming to be resumed on 6,000 ha of moderately and 5,000 ha of severely affected land by mid-2008, and estate farming restored on 20,000 ha of less-affected land by mid-2008; (ii) rehabilitation of support services through government infrastructure reconstruction, information and communication technology equipment, and vehicles; and (iii) community empowerment using self-help groups and directly targeted community grants

Fisheries Restore fishery production in affected areas in support of livelihood recovery.

(i) Community empowerment; (ii) small-scale capture fisheries; (iii) smallholder aquaculture; (iv) small-scale fishery infrastructure and facilities; (v) coastal resources rehabilitation; and (vi) fishery-support services restoration

Micro and small enterprises (i) Help revive livelihoods in the affected regions and provide support for sustainable income-generating capacity to help the most vulnerable people and low-income households engage in viable economic activity and (ii) facilitate the restoration and expansion of financial institutions that can sustain the extension of financial services to low-income households and micro and small enterprises

(i) Support for the development of a commercial microfinance system, (ii) establishment of an innovation fund, and (iii) creation of a technical support unit

Social Services Health (i) Restore and improve basic health care for the vulnerable and underserved and (ii) improve the efficiency of health-care delivery and enhance capacity for district health management.

(i) Health planning and management, (ii) human resource development, (iii) construction of health centers and equipment supply, and (iv) medical waste management

Education Rehabilitate and reconstruct disaster- and conflict-affected institutions and infrastructure to restore the sector back to a level at which students, teachers, and education officials can recommence their respective roles in a congenial environment.

(i) Upgrading of libraries, training of library staff, and replenishment of teaching and learning materials in 6 core subjects at 180 schools, later expanded to 395 schools; (ii) completion of civil works for 9 buildings and associated facilities at the Sabang model school; and (iii) construction and equipping of science and computer laboratories and teacher training in the use of information and communication technology and science equipment at 50 schools

Community Infrastructure Rural water supply and sanitation Provide sustained access to safe drinking water and improved sanitation and to improve the hygiene behavior of low-income communities in rural and peri-urban areas of Aceh and Nias.

(i) District and subdistrict capacity building, (ii) community empowerment, (iii) community-based water supply and sanitation facilities, and (iv) sanitation and hygiene behavioral change

Housing Provide housing for those made homeless and enable people to reestablish their lives in their pre-tsunami environs. Also provide security of land tenure for residents to facilitate economic recovery and provide a healthy and sanitary living environment.

(i) Reconstruction and rehabilitation of community housing; (ii) establishment of construction support centers to provide materials and skilled labor where appropriate, (iii) provision of a microcredit facility for house expansion, and (iv) support for neighborhood infrastructure such as on-site and off-site water and sanitation infrastructure, paths, streets, and basic drainage.

Irrigation Support economic revival in Aceh and Nias by restoring livelihoods in rural communities that were directly or indirectly affected by the earthquake

(i) Reconstruction and rehabilitation of irrigation infrastructure and upgrading of facilities in selected irrigation schemes; (ii) community empowerment by strengthening local water-user

22 Appendix 2

Objectives Subcomponents and tsunami through the reconstruction, rehabilitation, and upgrading of infrastructure and facilities in selected irrigation schemes.

associations, and (iii) institutional strengthening by building the capacity of provincial and district government working groups to assist in planning and implementation

Physical Infrastructure Spatial planning and environmental management (i) Facilitate economic revival in the affected regions by restoring livelihoods and (ii) restoring essential public services and rebuilding infrastructure.

(i) Village planning for the reconstruction of large numbers of houses and associated infrastructure; (ii) planning and preparation of subdistrict action plans and subdistrict spatial frameworks; (iii) district infrastructure planning to formulate and integrate an infrastructure-development program with capacity building; and (iv) forestry and natural resource management, integrating the Aceh Green Strategy to better mainstream forestry and natural resources management into policy

Roads and bridges Help restore economic and social activities in Aceh by improving and maintaining the three main roads’ traffic capacity during the reconstruction period and providing a sound base for subsequent operation, maintenance, and further upgrading.

(i) Krueng Raya road, the national road connecting Banda Aceh to Krueng Raya township and Malahayati port;(ii) East coast road, the main national road serving the northeastern districts of Aceh, including the port at Lhokseumawe; and (iii) Ulee Lheue roads, provincial roads in Banda Aceh, connecting the city center to Ulee Lheue Island, the ferry port, and the main west coast road

Power Contribute to reestablishing and promoting Aceh’s economic development.

(i) Earthquake and tsunami victims reconnected to the electric grid; (ii) the capacity of distribution lines increased; (iii) the reliability of electricity systems improved; and (iv) consumer services enhanced

Fiduciary Governance (i) Provide a smooth and expeditious flow of funds and their proper utilization; (ii) adequate internal controls and effective operation without corruption; (iii) appropriate systems for properly recording transactions, tracking fund flow, and expeditious procurement; (iv) proper administrative organization for implementation; and (v) participative planning and monitoring mechanisms.

(i) Strengthened fiduciary oversight and (ii) enhanced governance of the delivery of project assistance

Appendix 3 23

REVIEW OF COMPONENT IMPLEMENTATION

A. Livelihood Support

1. Agriculture

1. The December 2004 and March 2005, earthquakes and a tsunami severely affected agricultural areas in Aceh. Before the tsunami, 70%–90% of the families in affected districts were involved in agriculture and fisheries. An estimated 34,600 hectares (ha) of paddy fields and 27,600 ha of dry-land fields were affected by the tsunami, with about 17,500 ha of paddy fields heavily damaged, 10,000 ha moderately damaged, and 7,100 ha slightly damaged. About 2,900 ha were lost to the sea or became unusable for agriculture. Marine sand deposits and debris were serious problems. In most areas, salinization from saltwater inundation was not severe but would deplete yields significantly until the salt was fully washed out. Reduced yields and the resulting lower incomes were especially serious for farm families who were classified as poor before the tsunami.

2. The objectives of the agriculture component at appraisal were to (i) facilitate economic revival in the agriculture sector in affected regions by restoring rural livelihoods and (ii) alleviating constraints resulting from the lack of public goods and facilities by restoring essential agricultural services and rebuilding infrastructure. In July 2005, community empowerment was added as a third objective of the agriculture component and of fisheries and irrigation.

3. The component comprised three subcomponents: (i) the restoration of farming, mainly lowland rice, goats, and on estates abandoned because of the conflict, with farming to be resumed on 6,000 ha of moderately affected and 5,000 ha of severely affected land by mid-2008 and farming, including on estates, restored on 20,000 ha of less-affected land by mid-2008; (ii) the rehabilitation of support services through the reconstruction of government infrastructure information and the provision of communication technology equipment and vehicles; and (iii) community empowerment using self-help groups and directly targeted community grants.

4. The component was implemented on time in 4 years and on budget, which was disbursed using the national budget-allocation system. A national nongovernment organization (NGO), Bina Sawadya, was contracted by the Asian Development Bank (ADB) for community facilitation, mainly through self-help groups. The low priority given to community-driven development by the Agency for Rehabilitation and Reconstruction (BRR) meant that community facilitation for livelihoods was left largely to NGOs. Given the large number of funding agencies, sectors, and projects, and the limited number and capacity of local NGOs, support for the livelihoods sector was limited.

5. The implementing agency (IA) for the component was initially the Ministry of Agriculture in Jakarta, but, as with other components, the BRR became the IA in 2006. During 2005 and early 2006, while the BRR was establishing its own agriculture unit, component management was supported by consultants engaged by ADB on behalf of the government. Because of limited capacity in the BRR, significant support was provided by consultants and advisors in planning, implementation, and supervision to assist the Extended Mission to Sumatra (EMS) in project management.

24 Appendix 3

6. Consulting services for the design and implementation of the component were provided through an international firm in association with a local firm. International consultant inputs totaled 65 person-months and domestic 126 person-months. The national NGO provided 250 person-months for community empowerment and facilitation for agriculture, fisheries, and irrigation, with the assistance of over 4,000 person-months of local community facilitators, of which 138 person-months were provided to the agriculture component.

7. The initial allocation for the component was $30 million, which was subsequently increased to $32.4 million and utilized, including $6.9 million off budget and $25.5 million disbursed through the government budgetary process.

8. The agriculture component exceeded most of its original targets. Nearly 29,000 ha of farmland was rehabilitated and recommenced farming. Soil improvement and desalinization was completed on 18,500 ha, and over 6,000 ha was rehabilitated. Some severely damaged land with over 50 centimeters of sediment remained where land clearance was uneconomic. Key agricultural facilities were rehabilitated and/or built for provincial and district agriculture services, such as agricultural services offices, seed-production centers, rural extension centers, livestock veterinary centers, and local markets. Inputs of seed, fertilizer, hand tractors, threshers, and water pumps were provided to support the resumption of field crop production on 19,836 ha of land. Over 2,000 farmer groups were organized and provided with materials or equipment for planting food crops. Over 4,000 community members were trained and involved in community contracts. Nurseries were established for oil palm and cocoa, and over 8,000 ha of tree crops improved. Funds were provided to 59 livestock groups for raising goats. Agricultural production in Aceh and Nias had recovered to pre-tsunami levels by the end of 2007, and production is now above pre-tsunami levels and is rising.

2. Fisheries

9. Before the tsunami, 70%-90% of the families in affected districts were involved in agriculture and fisheries. Ponds for shrimp or fish had occupied over 36,000 ha in 11 coastal districts. Production dropped by 68%.

10. The objective of the fisheries component was to restore fishery production in affected areas to support livelihood recovery. The component provided technical and financial support and production inputs to (i) 12,000 affected small-scale fishers for repairing and restoring their fishing boats, boat engines, and gear; (ii) 2,000 affected smallholder fish farmers for rehabilitating 3,000 ha of fishponds in seven major aquaculture districts; and (iii) 80 affected coastal communities for rehabilitating about 12 fish-landing facilities.

11. The component comprised six subcomponents: (i) community empowerment, (ii) small-scale capture fisheries, (iii) smallholder aquaculture, (iv) small-scale fishery infrastructure and facilities, (v) coastal resource rehabilitation, and (vi) fishery support service restoration. The component went through prolonged stakeholder consultation involving assessment and planning that laid the foundation for subsequent implementation in a complex operating environment. The component placed substantial emphasis on environmental processes and management.

12. The Ministry of Marine Affairs and Fisheries (MMAF) was initially designated as the component IA, and a project management unit (PMU) was established in December 2005 in Banda Aceh. In 2006, the BRR was designated as the IA for the 2006 budget and remained as

Appendix 3 25

IA until the end of the fisheries component in 2009. Four management units were established in 2006 covering (i) community empowerment and institutions and service recovery (subcomponents 1 and 6); (ii) aquaculture and coastal environment rehabilitation (subcomponents 3 and 5); (iii) capture fisheries and infrastructure (subcomponents 2 and 4); and (iv) project implementation on the islands of Nias and Nias Selatan. District implementing units were established at district fishery service offices in 11 districts or cities under the management of the PMU.

13. On-budget procurement was undertaken through local competitive bidding, direct purchase, and 734 community contracts. The PMU established procurement committees during each budget year, working according to government and ADB procedures. Significant issues remained unresolved between ADB and the MMAF at the end of the project regarding excessive incremental operational costs charged by the MMAF project implementation units (PIUs) and failure to follow recommended procedures.1 There was also noncompliance with ADB and government procurement procedures and failure to provide the required documentation on a limited number of contracts.

14. PIUs appointed supervisors for aquaculture, boat construction, and fishery infrastructure subprojects. However, the untimely deployment of suitably qualified supervisory staff was an ongoing problem throughout implementation. In many of cases, supervisors were not competent to identify problems when construction failed to follow design specifications. ADB contracted an Indonesian NGO to facilitate the social empowerment aspect of the project’s fishery, agriculture, and irrigation components from 2006 to 2008. The main activities in fisheries were associated with socializing village grants and community contracts for ponds and agro-inputs. The community mobilization specialists and community facilitators were based in villages and worked with moderate success, despite initial difficulties regarding focus and coordination.

15. Component implementation required 68 months of international consultant inputs and 562 months of national. Consulting needs exceeded the estimates of 28 person-months of international and 180 of domestic because of (i) the need to support the PMUs and district implementation units, (ii) the extended implementation period, and (iii) the addition of significant activities in the latter stages of implementation. Compared with an original allocation of $30 million at appraisal, project funds totaling $29.8 million were channeled through government budgets and consultant contracts. Most component activities were executed on budget. Off-budget activities included limited civil works, capacity building, and consulting services with a total cost of $6 million.

16. More than 23,700 fishers and fish farmers, traders, and sellers were helped in resuming their livelihoods. Over 3,000 ha of fish and shrimp ponds were restored to pre-tsunami production levels by the end of 2007. Aquaculture livelihoods grants have enabled 1,460 smallholder fish farmers to resume aquaculture with grouper, crab, and other species. Fishery livelihood grants have been disbursed through community contracts in 734 fishery-dependent villages, providing equipment and other inputs to enable 17,860 small-scale fishers to restart their livelihoods. An innovative fish identification and market data system has been put in place and is being run through fishers’ associations. Highly innovative marine charts showing underwater hazards and currents with more than 5 million data points have been produced to benefit 3,000 fishers. The coastal environment has benefitted from the planting of 1.2 million trees, 75% of which survived. Human and social assets have been strengthened with nearly 1 In December 2005, ADB reached an agreement with the government under which incremental operating costs up

to 4% of the respective component allocations were funded by the project.

26 Appendix 3

18,000 people benefitting from training in livelihood skills. Provincial and district fishery offices have been rehabilitated and their services strengthened through the provision of training, equipment, motorcycles, and other vehicles.

3. Micro and Small Enterprises

17. Micro and small enterprises (MSEs) lacked broad access to financial services, as the long conflict in the region had isolated it from progress in microfinance. Some institutional providers of microfinance were operating before the tsunami, notably about 20 village or rural banks, of which nine survived the disaster and resumed limited operation. They needed assistance to recover and offer microfinance services. There was thus a need to develop institutional microfinance, starting with microenterprises. However, the provincial government lacked the capability to implement the component, especially regarding the newer areas of microfinance, such as Grameen-type banking. The component was designed to (i) help revive livelihoods in the affected regions and provide support for sustainable income-generating capacity to help the most vulnerable people and low-income households to engage in viable economic activities and (ii) facilitate the restoration and expansion of financial institutions that could extend financial services to low-income households and MSEs. The scope envisaged (i) support for developing a commercial microfinance system, (ii) establishing an innovation fund, and (iii) creating a technical support unit. During implementation, the scope was changed with the introduction of a $1 million livelihood fund and the $8.5 million Microfinance Innovation Fund (MIF). The livelihood fund provided emergency one-time grants to disaster victims, individuals, and communities to help restart damaged MSEs. The MIF provided funds for the expansion of the microfinance portfolios of partner banks and microfinance institutions through grants and equity infusion on market terms. Capacity-building technical assistance was to be provided to 12 governments and 8 private people’s credit banks.

18. The component was implemented off budget with a consulting firm assisting its administration. Mercy Corps was given responsibility for distributing cash grants under livelihood emergency support. Permodalan Nasional Madani is the custodian for the MIF. A United Nations agency undertook enhancing credit banks’ information technology, the German Agency for Technical Cooperation2 .GTZ and Mercy Corps the installation of information technology systems, and a private organization3 the training and mentoring of village and rural credit banks.

19. The component was completed in 4 years at a cost of $13.6 million. The Livelihood Fund was disbursed within 1 year to 8,700 MSEs. The MIF was established in 2006 but not disbursed until mid-2007 because of procedural difficulties including the initial disbursement from ADB to the MIF imprest account. Grants from the revolving fund had been made to 10 participating financing institutions by April 2009 for periods of 1 or 2 years. In total, 84% of the $8.5 million fund was lent to two large banks, with BPD Aceh receiving $4.5 million and Bank Bukopin $2.6 million. The remaining funds were allocated to eight rural banks. A draft exit strategy was developed by the component consultant in mid-2009 in consultation with stakeholders. The strategy has yet to be finalized or implemented; in early 2010, the activities of the MIF were effectively frozen.

20. International consulting inputs totaled 123 person-months, 33% more than planned, and domestic consultant inputs totaled 150 person-months, 69% of the planned number. The inputs of the microfinance specialist and deputy team leader and of the NGO and civil society 2 Gesselschaft Fuer Technische Zussamenerbeit (GTZ) 3 Usaha Karya Bina Mandiri (UKABIMA)

Appendix 3 27

specialist were considerably lower than planned, suggesting an imbalance between domestic and international inputs.

B. Social Services

1. Health

21. Prior to the tsunami and earthquake disasters of 2004 and 2005, the performance of the health system in most Aceh districts and in Nias was poor. An estimated 20% of health facilities in the province were destroyed or severely incapacitated by the disasters, and 10% of health professionals died. The impact on the mental health of residents of affected communities was also severe. One study reported that 84% of sampled residents demonstrated severe emotional distress, and 77% showed depression. At appraisal, it was intended to go beyond replacing the damaged health facilities and assist in restructuring the health-care system with the full participation of the affected communities.

22. The component’s original objectives were to (i) restore and improve basic health care for the vulnerable and underserved and (ii) improve the efficiency of the health-care system, enhancing the capacity for district health management. The revised scope comprised four subcomponents: (i) health planning and management, (ii) human resource development (HRD), (iii) the construction and equipping of health centers, and (iv) medical waste management.

23. However, most activities in the health planning and management subcomponent were cancelled, including health disaster analysis, the development and implementation of a strategic plan, and the development of health information systems. Delays in mobilizing consultants meant that taking stock of the disaster lost its relevance. More important, the timing for undertaking institutional and health information system reform was inappropriate as most stakeholders focused on physical reconstruction. A capacity-building program was included under the subcomponent for Nias to improve the health-management and planning skills of the staff of the health centers to be provided under subcomponent 3 and to help revitalize community-based health programs. The HRD subcomponent comprised (i) strengthening nursing and midwifery capacity, (ii) mental health care, and (iii) capacity building in community health system management, including curriculum and module development for capacity-building programs. The medical and pharmaceutical waste-management subcomponent comprised (i) pharmaceutical waste removal, (ii) the installation of incinerators, and (iii) training in managing medical waste. It was estimated that 1,000 tons of unused and out-of-date pharmaceuticals in Aceh needed disposal.

24. Six model health centers4 were to be constructed and equipped in Nias, and 11 in Aceh. However, because of delay in consultant mobilization, the BRR opted in 2006 to finance the civil works activities for the 11 centers, with the project financing the centers’ medical equipment. The BRR also requested the project to finance civil works and the purchase of equipment for another five health centers.5 The subcomponent included the construction and equipping of a building for community health system management.

4 The six centers are in Gunungsitoli, Awa’ai, Alasa, Teluk Dalam, Lahusa, and Lolowa’u and represent a range of

settings: urban, semi-rural, and isolated rural. 5 In Lhok Bengkuang in Aceh Selatan District; Penanggalan in Sabulussalam city; Simpang Kanan in Aceh Singkil

District; and Tanoh Alas and Deleng Phokishen in Aceh Tenggara District.

28 Appendix 3

25. Component oversight was delegated to the EMS in late 2006. The BRR established PIUs in Aceh starting in 2006 and Nias beginning in 2007. The PIUs in both places were staffed mostly by local government officials or locally hired administrative staff. The PIUs received technical support from consultants.

26. The PIUs procured civil works and medical equipment using local competitive bidding. They organized capacity building with support from consultants who provided oversight and technical guidance. Coordination was maintained with the BRR’s directorate of health in Aceh and the regional office in Nias. All expenditure except for consulting services was through the government’s treasury system.

27. Consulting services under the component were provided by individual consultants and through contracts with two firms. The total of 77 person-months of international consulting inputs exceeded an initial plan of 62 person-months, and 246 person-months of domestic consultant inputs exceeded the initial plan of 194 person-months. Consulting services accounted for a high 28% of component costs, and project management a high 6%.

28. Initially the component had an allocation of $21 million, but there was limited progress in 2005. Given the response of other aid agencies, the BRR requested review of the component’s design. A revised proposal was agreed in April 2006 with an estimated cost of $17 million. However, the component allocation was subsequently revised to $12 million. The component was completed in February 2009 at a cost of $11.36million.

29. The revised component targets were achieved. The HRD and capacity-building programs were delivered as planned, including primary health care, midwifery, mental health care, and community-based mental health care and treatment. The six heath centers in Nias and the five elsewhere were built and supplied with equipment. The community health system management building was completed. About 442 cubic meters of pharmaceutical waste was disposed of using guidelines developed to ensure all stages, from sorting to destruction, were carried out safely. Incinerators were installed in 10 district hospitals, and trainers and staff were trained in managing medical waste.

2. Education and Skills Development

30. The education sector suffered extensively from the catastrophic tsunami and earthquakes of December 2004 and March 2005, which killed 2,500 teachers and ruined more than 2,000 schools along the northern and western coasts of Aceh and in Nias. In addition, local school-development programs across the region were disrupted as government resources were redirected to support post-disaster relief and recovery. These losses were particularly severe as education standards in Aceh were already lower than in many other regions because of the protracted separatist conflict and state of emergency, which disrupted livelihoods and service delivery, especially for education and health. In July 2004, before the tsunami, Aceh was ranked 27th of the country’s 31 provinces in respect of students passing national examinations. Hundreds of schools were burned in the fighting, disrupting classes and displacing hundreds of teachers and tens of thousands of students. Regional insecurity also made training, recruiting, and retaining qualified teachers difficult in many areas.

31. The objective of the component was to rehabilitate and reconstruct institutions and infrastructures affected by the disaster and restore the sector such that students, teachers, and education officials could recommence their respective roles in a congenial environment. The

Appendix 3 29

component initially envisaged assistance at all levels, including the reconstruction or rehabilitation of destroyed or damaged infrastructure; replacement of furniture, equipment, and teaching materials; and training of new teaching staff and education managers. Given the resources for school rehabilitation and reconstruction provided by many aid agencies and NGOs, the government requested that ADB redesign the proposal and focus its support on senior secondary education, with a particular focus on strategies to upgrade teaching and learning resources. The government further requested that support be provided to conflict-affected and remote areas in addition to the tsunami-affected districts to ensure equitable development across the region.

32. The component had three subcomponents: (i) upgrading libraries, training library staff, and replenishing teaching and learning materials in six core subjects at 180 schools, later expanded to 395 schools; (ii) completing civil works on nine buildings and associated facilities at the Sabang model school; and (iii) constructing and equipping science and computer laboratories and teacher training in the use of information and communication technology and science equipment at 50 schools.

33. PIUs were established under the supervision and direction of the BRR that were responsible for coordinating, implementing, and managing the education component under the supervision and monitoring of the consultant team. Project design had envisaged that the PIU would coordinate component activities through provincial and district education offices, but instead the PIU consulted directly with the schools, which undercut support for the BRR from education offices.

34. For subcomponent 3, the design team recommended prefabricated buildings to be directly procured by PIUs on behalf of each school. However, this form of construction was dropped prior to project inception in favor of conventional cement-rendered brick procured using local competitive bidding. Funds were dispersed in block grants to communities. With the change in construction modality and funding mechanism, additional building inspectors had to be appointed and construction was delayed, which delayed the delivery of the capacity-building program. Completing the capacity-building program was recognized as essential to sustain the considerable investment in infrastructure and laboratory equipment, and a modified capacity-building program was completed in September 2009.

35. A consortium of international and local companies was engaged to provide consulting services initially to design the education component and then to implement it. Additional inputs were provided for design (32 person-months, up from 17 person-months) with the change in construction method. Additional implementation assistance was needed, bringing a substantial increase in national sub-professional services. International inputs increased from 23 to 40 person-months, and national from 339 to 504.

36. The component achieved its revised design targets: (i) It replenished teaching and learning materials, upgraded school libraries, and trained librarians in 395 schools in all 23 districts of Aceh and Nias, covering 75% of senior secondary schools in Aceh and 100% in Nias. (ii) It constructed a senior secondary school at Sabang. (iii) It upgraded practical science and information communication technology at 41 senior secondary schools. The allocation for the education component was originally $21 million but, with component redesign, was reduced to $16.36 million. The component was completed within budget in November 2009.

30 Appendix 3

C. Community Infrastructure

1. Rural Water Supply and Sanitation

37. Water supply and sanitation coverage in Aceh and North Sumatra was below the national average before the disaster. Only 9% of Aceh and 24% of North Sumatra residents had piped water. System efficiency was low, with non-revenue water estimated at 30%-50%. Most residents, particularly in rural areas, relied on wells and hand pumps or small private water providers and vendors. Prior to the tsunami, most sanitation was on-site with septic tanks and pit latrines, but coverage was low and almost nonexistent in many rural villages of the two provinces. Much of this limited infrastructure was destroyed by the earthquakes and tsunami. ADB provided an emergency assistance grant to help several provinces rehabilitate their rural water supply and sanitation (RWSS) facilities, covering seven districts and approximately 400 communities. The RWSS component of the project complemented the Community Water Services and Health Project (CWSHP) 6 and was executed simultaneously. Each project targeted 200 villages. The project component covered the three districts of Nias, Nias Selatan, and Nagan Raya, while the CWSHP covered Aceh Jaya, Pidie, Bireuen, and Aceh Utara.

38. The RWSS component provided sustained access to safe drinking water and improved sanitation and improved the hygiene behavior of low-income communities in rural and peri-urban areas of Aceh and Nias. It also helped improve district government capacity to facilitate and regulate basic water and sanitation services; empower communities to take responsibility for developing and implementing such services using a demand-driven, community-based approach; and raise awareness about healthy and hygienic behavior.

39. The RWSS component was executed by the BRR, and the executing agency (EA) for the CWSHP was the Ministry of Health’s Directorate General of Disease Control and Environmental Health. A central PMU was established in the Ministry of Health. In each project province, a coordinating committee was appointed to support district coordinating teams. PMUs were established within provincial departments of health to act as the main contact at the provincial level. District PMUs were also set up under the head of the district health office and staffed by members from participating agencies. Teams of consultants were engaged at each implementation level to support the government bodies.

40. The RWSS component and the CWSHP together had seven consultant packages. Three individual consultant contracts were completed early in the projects to help prepare subproject appraisal reports and help PMUs with procurement and the design of monitoring systems. Four firms were then contracted to assist EAs in project implementation. The project oversight consultant provided support to the PMU, an implementation team provided support to provincial PMUs and provincial health offices of Aceh and North Sumatra, and domestic consultant teams supported the seven district health offices and PMUs on implementation matters. A total of 105 community facilitators were engaged in 35 teams. Only the oversight consultant was financed under the RWSS component; the other consultant packages were funded by the CWSHP.

41. Activities were funded by (i) a $10.5 million grant for Aceh and Nias under the project, later reduced to $7 million, and (ii) a $16.5 million grant for Aceh and Nias provided by the governments of Canada (Can$5.0 million, equivalent to $4.0 million, later reduced to $3.7

6 ADB. 2005. Report and Recommendation to the Board of Directors on Proposed Loans and Emergency Assistance

Grant to the Republic of Indonesia for the Community Water Services and Health Project. Manila.

Appendix 3 31

million), the Netherlands ($5.0 million), and the United Kingdom ($7.5 million equivalent). Of the $7 million allocated to the RWSS component, $6.16 million was utilized by component completion in December 2009.

42. The component developed RWSS in 142 villages with 18,200 households. Though fewer than the planned 200 villages were served, most targets were exceeded under the RWSS component, and it is anticipated that the CWSHP will be completed on time. The RWSS component is considered partly relevant in the context of the project, as it made only a limited contribution to reconstruction and rehabilitation. It did, however, contribute strongly to the provision of RWSS facilities for villagers and developed strong participatory management.

2. Housing

43. Initial estimates of damage and loss found 127,000 houses completely destroyed and 152,000 housing units suffering damage equal on average to about half of their value. Much of the damage was concentrated in the coastal zones of Aceh Barat, Aceh Besar, Aceh Jaya, and Banda Aceh. Housing settlements, though affected by civil conflict that impeded the delivery of essential services, had still functioned in homogeneous communities prior to the disaster’s causing the loss of landownership records and planning documents in many areas. Estimates placed need at 93,000 new housing units and repairs7 for 47,000 units.

44. The overall objective of the component was to provide housing for those made homeless and enable people to restore their lives in their old environs. Secondary objectives were to provide security of land tenure for residents, which would facilitate economic recovery and provide a healthy and sanitary living environment. Subcomponents included (i) reconstructing and rehabilitating community housing; (ii) establishing construction support centers to provide materials and skilled labor where appropriate; (iii) providing a microcredit facility for house expansion;8 and (iv) support for neighborhood infrastructure such as on-site and off-site water and sanitation facilities, paths, streets, and basic drainage.

45. The approach was a people-centered, community-based and participatory rehabilitation-and-reconstruction program with central roles for civil society and NGOs. Housing rehabilitation and reconstruction would be a lead intervention for reconstructing lives and integrated with other sector strategies, linking housing with employment, economic growth and business development. Priority was given to urban and peri-urban areas.

46. Consultants were hired on direct contracts in April 2005 to prepare an initial batch of 11 subprojects for a total of 3,621 new houses and 2,039 rehabilitated units. Blang Krueng (later replaced by Lamdingin) and Gampong Pande were chosen as pilot subproject areas, and projects were prepared with resident communities up to inviting tenders. However, at that time the powers and responsibilities of the government coordinating agency, the BRR, in relation to ministries and provincial and local governments were unclear. The work could not proceed as there was no clear government contracting party. This issue was resolved only after BRR working groups were establish in February 2006, when the BRR assumed the role of IA that gave it the authority to sign construction contracts. Two consultant teams were assigned to oversee and support subproject implementation.

7 Houses less than 50% damaged were repaired, and those more than 50% damaged were replaced. 8 A separate microcredit facility for housing expansion has not been pursued because of limited demand and

complexities in implementation.

32 Appendix 3

47. In March 2006, ADB agreed with the government to implement off-budget housing construction in parallel with on-budget activities through direct contracts between ADB and five implementing partners with the objective of accelerating the delivery of houses. The engagement of off-budget partners was an innovation, as ADB had never before given contracts valued at more than $100,000 to NGOs. Five partners were given contracts valued at slightly under $5 million each.9 The partner agencies met the essential requirements of secure land title for beneficiaries, earthquake-resistant construction, and the procurement of goods and services and financial management in accordance with acceptable procedures. These partners also had the advantages of available sites and beneficiaries and preparation work already carried out, although lacking funds for implementation. Oversight consultants were tasked with monitoring and supervising both on-budget and off-budget parts of the component. Project implementation was carried out both by commercial contractors and through community contracts for both modalities. Off-budget partners also retrofitted sanitation facilities in 625 houses that were earlier constructed on budget.

48. In view of the rapid increase in construction costs during 2005–2006, it was agreed to reduce the targeted number of new housing units from 14,000 to 8,000 and number to be repaired or rehabilitated from 10,000 to 2,000. In the end, 6,000 new housing units were completed and 1,100 houses were repaired by December 2009. The shortfall was caused by (i) significant preoccupation with housing quality, particularly with the introduction of enhanced earthquake resistance, which increased costs; (ii) rapid construction price increases; (iii) the constrained implementation capacity of the BRR and the commercial construction industry; and (iv) the increasingly difficult task of finding locations where new housing could still be built on a reasonable scale without requiring relocation. All rehabilitation was implemented through community contracting, with 834 houses rehabilitated on budget and 275 off. With subsidies received, residents had the option to renovate or reconstruct their houses, and a remarkable 30% of them actually increased investments by 50%-100% with their own contributions.

49. Operational problems arose from the limited human and material resources of the construction industry in Aceh and Nias. Construction materials such as steel, cement, and timber came from Medan or Java. Shortages of materials and lack of local skilled labor caused delays and cost increases, especially on the island of Simeulue and, to certain extent, in Nias. The difficulty of procuring construction material and labor was further aggravated on Simeulue by informal restrictive procurement practices exercised by powerful local interests.

50. On-budget housing rehabilitation in Nias was a major success in terms of the rehabilitation of heritage structures in a culturally sensitive context. The challenges of reconstructing and rehabilitating earthquake-damaged housing stock in traditional villages in southern Nias was addressed in an unprecedented manner. The combination of on-budget and community contracting proved to be highly successful. Community contracting was the key to encouraging maximum participation, overcoming problems of building materials shortage, and achieving the sustainability of historic architecture while carefully introducing some innovations in building technology. The reconstruction of houses in nontraditional villages has produced an important contribution to earthquake-resistant construction, which has been copied by the BRR and a few NGOs. The experience of southern Nias is an example of cultural adaptation in a highly complex cultural and cultural setting that few organizations dare to work in. The rehabilitation and reconstruction work in Nias was not without difficulties and, in retrospect, needed much more social preparation with the community. As it turned out, the technical and 9 The partner agencies were the Catholic Organization for Relief and Development Aid, Hilfe Zur Selbsthilfe e.V,

Deutsche Welthungerhilfe, Muslim Aid, and the United Nations Human Settlements Programme.

Appendix 3 33

civil works progressed relatively quickly, but preparing agreements with the community took much longer than expected. In some villages, tensions between traditional community leaders and the modern village head remain.

51. More than 32 ha of land was purchased by the BRR and granted to beneficiaries who had to be relocated, accounting for one-third of the new housing units. The facilitation of land title certification provided beneficiaries with legal proof of landownership, especially appreciated where they had been renting or squatting prior to the earthquake and tsunami.

52. The allocation for the housing component was the largest in the project, at $75.36 million, or more than a quarter of the total ADB commitment of $294.5 million. At appraisal, the allocation was intended to fund the reconstruction of 14,000 housing units that had been completely destroyed and the rehabilitation of 10,000 partly damaged housing units. The unit price for reconstruction was Rp33.8 million including Rp5 million for environmental infrastructure, and the unit price for rehabilitation was Rp15 million including 5 million for environmental infrastructure.10

3. Irrigation

53. The irrigation sector in Aceh comprises nearly 470 farmer-owned and government schemes extending to 335,000 ha. In Nias, 75 schemes have a total command area of 17,400 ha. Particularly in Aceh, many of the schemes were in poor condition before the tsunami because of years of civil conflict and lack of maintenance. Only 70% were classed as fully functional. The tsunami damaged schemes near the coast in Aceh, particularly on the west coast, and the March 2005 earthquake damaged weirs and canals in Nias. Schemes with a command area totaling 121,000 ha were damaged by the earthquake and tsunami, including 107,000 ha on Aceh and 14,000 ha on Nias.

54. The component supported economic revival in Aceh and Nias by reconstructing, rehabilitating, and upgrading selected irrigation schemes. It supported increasing farm output to pre-tsunami levels on 20,600 ha of irrigated farmland by mid-2008 and the resumption of farming on 12,000 ha of tsunami-affected irrigated farmland. The component had three subcomponents:

(i) the reconstruction and rehabilitation of irrigation infrastructure and upgrading of facilities in selected irrigation schemes,

(ii) community empowerment by strengthening local water-users associations (WUAs), and

(iii) institutional strengthening by building the capacity of provincial and district government working groups to assist in planning and implementation.

55. Preliminary design was undertaken by consultants engaged under Northern Sumatra Irrigated Agriculture Sector Project.11 Component consultants appointed by ADB were mobilized in August 2005. A total of 92 schemes were taken forward to implementation with a command area of 58,800 ha, of which 30,400 ha was served by the rehabilitated infrastructure, or 7% less than indicated at appraisal. The area included (i) 9,100 ha of tsunami-damaged schemes in

10 These rates were specified in the reconstruction blue print prepared by the National Development Planning Agency

[BAPPENAS] in April 2005. 11 ADB. 1997. Report and Recommendation of the President to the Board of Directors on a Proposed Grant to the

Republic of Indonesia for the Northern Sumatra Irrigated Agriculture Sector Project. Manila. See also ADB. 2007. Completion Report for the Northern Sumatra Irrigated Agriculture Sector Project. Manila.

34 Appendix 3

Aceh, (ii) 18,900 ha with minor damage in Aceh that was conflict affected, and (iii) 2,300 ha of earthquake-damaged schemes on Nias. The inclusion of conflict-affected areas was justified by the need to complete works not finished under the previous project and to improve previously neglected schemes outside the tsunami-affected areas to promote equity between coastal and hinterland areas.

56. The Directorate General of Water Resources of the Ministry of Public Works was IA until the end of 2005, after which the BRR was both EA and IA until the end of its mandate in April 2009. A PIU was established under the BRR with subproject managers (SPMs) appointed to manage rehabilitation works and associated activities. The Aceh and North Sumatra provincial and district governments provided support in planning, coordinating, and overseeing the rehabilitation works, acting through the working groups established under the component.

57. Rural communities that depended on irrigation were the primary stakeholders in and beneficiaries of the component. WUAs participated actively in planning, designing, and constructing the irrigation rehabilitation works under the component. Bina Swadaya facilitated WUA activities through district-based community facilitators.

58. The procurement of all goods and services except consulting services was carried out by the BRR through the PIU. ADB reviewed and approved procurement contracts after they were awarded. In total, 129 local competitive bidding contracts for rehabilitating 92 irrigation schemes were executed by national contractors. In addition, 492 community contracts with a contract ceiling of $30,000 each were awarded to WUAs created or strengthened under the component. The first local competitive bidding contract commenced in late July 2006 and provisional handover under the last contract took place in mid-November 2008. The BRR disbanded the PIU at the end of December 2008, and ADB demobilized consultants at the same time. The effective implementation period was thus 3.4 years, about 6 months longer than planned.

59. Consulting inputs totaled 2,726 person-months. Professional inputs were 5 times the level planned for international consultancy and 3.6 times higher for domestic. Partly because they were engaged directly by ADB, consultants were confined to an assisting role in their collaboration with IAs, rather than the more normal task role. The cost of consultancy inputs was $7.4 million, or $243 per hectare upgraded. The high use of consulting services suggests that the PIU, SPMs, and WUAs needed strong support. The overall budget for the component was $31.5 million, subsequently reduced to actual expenditure of about $30 million to the end of 2009.

D. Physical Infrastructure

1. Spatial Planning and Environmental Management

60. The overall goal of the government reconstruction master plan was to help rebuild the affected regions and support their economic revival to meet or surpass the Millennium Development Goals. Its purpose was to (i) facilitate economic revival in the affected regions by restoring livelihoods and (ii) restore essential public services and rebuild infrastructure. The SPEM component was to contribute to a more sustainable reconstruction and rehabilitation process in Aceh and Nias. By pursuing a variety of activities in spatial planning, environmental management, spatial information management and in-village planning, the component envisaged (i) government institutional capacity development, (ii) strategic environmental assessment, (iii) spatial analysis and zoning, (iv) area and site planning for reconstruction, and

Appendix 3 35

(v) community participation in planning. Originally, the SPEM approach was based on the experience of the Marine and Coastal Resources Management Project.12 The principles and procedures of integrated coastal zone and watershed management were thought at the time to provide a comprehensive decision-making framework to support reconstruction and a suitable framework for the restoration of institutional capacity.

61. The component comprised four subcomponents:

(i) Village planning. Contribute to meeting the immediate need to reconstruct large numbers of houses and associated infrastructure.

(ii) Planning and preparation of subdistrict action plans and subdistrict spatial frameworks. Support the development and implementation of a rehabilitation and reconstruction process for urgently creating project action plans and spatial frameworks at the subdistrict level.

(iii) District infrastructure planning. Support the government strategy for district and provincial infrastructure reconstruction on the east and west coasts of Aceh by formulating and integrating an infrastructure-development program with capacity building.

(iv) Forestry and natural resources management. Assist the Aceh Provincial Government in supporting the integration of the Aceh Green Strategy to better mainstream forestry and natural resource management in policy.

62. The SPEM component was initially supervised by the Agriculture and Natural Resources Division of the Southeast Asia Department with the support of the EMS. In early 2007, the administration of the component was delegated to the EMS. The Indonesia Resident Mission of ADB administered the component after the closure of the EMS in June 2009.

63. From October 2005 until the end of its mandate in April 2009, the BRR was the executing and implementing agency for all subcomponents. Thereafter, BAPPENAS took over as EA. The Ministry of Public Works and the provincial forest department became the IAs for the remaining activities under subcomponents 3 and 4, respectively.

64. All SPEM activities under subcomponents 1 and 2 originally started under the supervision of the deputy for spatial planning in the BRR. Subcomponents 3 and 4 were implemented after the reorganization of the BRR, when the spatial planning deputy position was abolished and a directorate for spatial planning was created under the BRR housing deputy. Coordination with provincial and local government was implicit from the beginning but more formalized in the planning process as new activities were added.

65. To undertake activities under the subcomponents, consulting firms were separately engaged from Australia (three packages), Indonesia (one package), Singapore (one package), and the United States (one package). Under subcomponent 4, the Syiah Kuala University of Aceh assisted in preparing provincial regulations for the conservation of natural resources, performing these tasks under the guidance of the provincial legislature. The reason for launching this activity in this way was to allow the changes in forestry management to be placed in a local regulatory environment that balanced the needs of Aceh Province with the forestry regime and policies of the national government. All subcomponents were executed as technical 12 ADB. 2000. Report and Recommendation of the President to the Board of Directors on a Proposed Grant to the

Republic of Indonesia for the Marine and Coastal Resources Management Project. Manila.

36 Appendix 3

assistance, with no physical investment involved. Altogether, there were 2,813.6 person-months of consulting services, of which 442.6 person-months were provided by international experts and 2,371 person-months by national experts. The expanded scope and extended duration of most packages required considerably more consultant inputs than envisaged at appraisal.

66. The component had an initial allocation of $15 million that was increased to $17.5 million to meet the requirements of expanded scope, including covering the conflict regions in addition to tsunami-affected areas. Actual cost at grant completion was $17 million. Subcomponent 1 started in April 2007, subcomponent 2 in December 2008, and subcomponents 3 and 4 were completed in March 2010.

2. Roads and Bridges

67. The December 2004 earthquake and tsunami seriously damaged road infrastructure in Aceh, particularly the main west coast road and roads in the coastal areas of Banda Aceh. The destruction of the commercial ports supplying Banda Aceh made it necessary to bring most of the reconstruction materials in through the port at Lhokseumawe and Belawan Port (near the city of Medan) in North Sumatra, putting heavy traffic pressure on the main east coast road (ECR). The road to the remaining port near Banda Aceh, 30 km to the east in Krueng Raya, was also in poor condition and required repair and upgrading to handle the anticipated increase in heavy hauling traffic.

68. The component responded to priorities identified by the government during the first half of 2005. Following an initial assessment by ADB and Indonesian agencies in early 2005, three major roads in Aceh province were selected for rehabilitation or reconstruction under the project’s roads and bridges component:

(i) Krueng Raya road (KRR), the national road connecting Banda Aceh to Krueng Raya township and Malahayati port;

(ii) ECR, the main national road serving the northeastern districts of Aceh, including the port at Lhokseumawe, and connecting Banda Aceh to Medan and the adjoining Belawan Port in North Sumatra; and

(iii) Ulee Lheue roads (ULR), the provincial roads in Banda Aceh serving the Meuraksa residential and commercial area and connecting the city center to Ulee Lheue island and the ferry port and to the main west coast road at Simpang Rima.

69. Initially, the Directorate General of Highways established a PIU in Jakarta. However, as with the other components, the BRR became the IA in 2006 and established a new PIU in Banda Aceh. Following BRR closure in April 2009, the Directorate General of Highways again became the IA.

70. Reconstruction and rehabilitation works were carried out in two overlapping phases. Preparation for phase 1, with an initial allocation of $17.8 million, commenced with the mobilization of a project preparation consultant team in September 2005. Construction began in September 2006. ADB assistance was sought and approved in 2006 to extend the ULR to the Ulee Lheue ferry port and to undertake additional works on the KRR and ECR. The allocation for civil works was increased to $32.8 million in late 2006, and design for phase 2 commenced in January 2007. Construction began in April 2008. All subprojects were completed by December 2009 at a total cost of $37.6 million. Grant funding up to $32.8 million was possible, with the rest funded from government resources. The cost increase reflected the extended

Appendix 3 37

scope of the project and price escalation on LCB contracts longer than 12 months. The total implementation period for the component was 4.5 years, longer than the planned 3.2 years mainly because of ULR time overruns and the inclusion of phase 2 works.

71. Consulting inputs during the two phases totaled 591 person-months, more than double the planned 273 person-months. The total cost of consultancy services under the component was $5.4 million, or 14% of the final component allocation. The consultants generally worked well under difficult conditions, particularly given their lack of direct responsibility for determining the scope of works or the quality control and assurance of component outputs.

72. Despite delays, the road works facilitated the steady flow of goods from the principal supply areas to Aceh. Completing all works, including new alignments added late in the project period, within 4.5 years is considered justified, considering the circumstances. Other outcomes include significant safety improvement on the ECR and reduction in transit times. Aspects requiring further work in some sections were reported to include signage; road surface improvement, particularly between Lhokseumawe and Medan, outside the area covered by the component; road widening; and the completion of lane marking, reflectors, and other safety measures.

3. Power

73. Prior to the tsunami, electricity was supplied to Aceh mainly through the Northern Sumatra network. The scope of services was limited, with only the eastern coastal area and cities receiving service. Additional electricity was supplied through local networks from diesel power units, which often had problems. These conditions grew worse as thieves stole electricity cables and dismantled parts of towers and several high voltage towers collapsed. Infrastructure did not extend to remote areas. Farther into the central mountains and western coast, electricity was not available at all.

74. The 2004 earthquake and tsunami severely damaged the electricity system. Perusahaan Listerik Negara (PLN, the state electricity company) lost many of its assets, including distribution lines, offices, service buildings, and a small number of power plants. One of the most dramatic pictures of the tsunami was of PLN’s 3,600-ton 12-megawatt floating power plant in Banda Aceh, which was carried about 3 km inland. A 1-megawatt plant in Calang was also destroyed. Total damage to PLN assets was estimated at $45.6 million.

75. Most damage was in and around Banda Aceh city; Bireuen, Meulaboh and Sigli towns; and Simeulue Island. Reestablishing the electricity system was critical to rehabilitation in Aceh and ensuring that other assets that were rehabilitated and reconstructed could be fully utilized. The need was seen to extend electrification to previously unserved areas. PLN supplies to urban areas were quickly restored, but project assistance was requested to rebuild and extend damaged transmission lines and supporting infrastructure. Initial support was provided by ADB with nearly $7.2 made available through the reprogramming of the ongoing grants for the Power XXIII Project and the Renewable Energy Development Sector Program for rehabilitating 938 km of medium-voltage transmission lines in Banda Aceh, Meulaboh, and Sigli.13

13 ADB. 1993. Report and Recommendation of the President to the Board of Directors on a Proposed Grant to the

Republic of Indonesia for the Power XXIII Project. Manila; ADB. 2002. Report and Recommendation of the President to the Board of Directors on a Proposed Grant to the Republic of Indonesia for the Renewable Energy Development Sector Program. Manila.

38 Appendix 3

76. Component objectives were to (i) reconnect earthquake and tsunami victims to the electricity system; (ii) increase the capacity of distribution lines; (iii) improve the reliability of electricity systems; and (iv) enhance consumer services. The overall goal was to contribute to reestablishing and promoting Aceh’s economic development.

77. Initially, the component focused on constructing medium- and low-voltage lines. PLN subsequently requested the inclusion of consumer lines and metering equipment; a service building and the installation of a supervisory control and data acquisition (SCADA) system for service optimization; and the provision of safety tools.

78. The BRR was the EA and PLN the IA. The PIU was a unit within the BRR but was staffed by employees from PLN’s Rural Electricity Program Division. A total of 25 civil works and equipment supply contracts were awarded, mostly through LCB. The purchase of the SCADA system was tendered through limited international bidding. Total component cost at completion was at $10.5 million, including PLN funding of $1.0 million. Unlike several on-budget components, the component did not suffer budget adjustment delays as contract packages were relatively simple to program and PIU staff had extensive experience in project implementation.

79. Following the completion of the subproject appraisal reports (SPARs) and subproject preparation reports (SPPRs) in January 2007, the PIU prepared bidding documents assisted by the component consultants from February to October 2007. Implementation started immediately, and physical works were completed by October 2008.

80. Nine person-months of international consulting inputs and eight person-months of domestic inputs were planned. However, it was subsequently agreed that the PLN had in-house capacity to design, implement, and supervise construction. Therefore, only two domestic consultants were engaged, providing total inputs of 15 person-months. The cost of consulting services was less than 1% of component expenditure, the lowest of any project component.

E. Fiduciary Governance

81. The fiduciary governance component was designed to facilitate the implementation of the project in a cost-effective, efficient, and timely manner by establishing a sound financial management system, aided by the smooth flow of funds and assurance of overall accountability. The objectives of the component were to ensure (i) the smooth and expeditious flow of funds and their proper utilization; (ii) adequate internal controls and effective operation without corruption; (iii) appropriate systems for properly recording transactions, tracking the flow of funds, and expeditious procurement; (iv) proper administrative organization for implementation; and (v) participative planning and monitoring mechanisms.

82. The component included two major subcomponents to (i) strengthen fiduciary oversight; and (ii) enhance governance in the delivery of project assistance. The first component, dealing with strengthening fiduciary oversight, included the following:

(i) It established the Special Treasury Office for processing and authorizing payments for rehabilitation and reconstruction. The office was intended to act as a dedicated cash manager for the government and an important conduit for the flow of rehabilitation and reconstruction funds, which were on-budget and not limited to the project.

Appendix 3 39

(ii) It restored and strengthened the capacity of the Supreme Audit Institution and the internal control institution of local governments in the affected regions of Aceh and Nias to enable them to review the adequacy of internal controls and ensure the effectiveness, efficiency, and economy of rehabilitation and reconstruction.

(iii) It provided operational support for the investigative activities of the Corruption Prevention Commission.

83. The second component, to enhance governance in the delivery of project assistance, involved establishing or providing support for

(i) a sound financial management system to enable the proper and transparent recording of all transactions and tracking the flow of funds to enhance overall transparency, accountability, and disclosure;

(ii) effective internal control systems to be utilized at all governmental levels; (iii) an efficient and effective procurement system for the project overall; (iv) effective project implementation through the provision of financial assistance to

meet the cost of the establishing the PMO in the BRR; and (v) the establishment of participatory planning, monitoring, and evaluation

mechanisms that include community participation and the balanced distribution of assistance, restoration of land records, evaluation of the progress of the project, handling of complaints, and external monitoring of settlements.

84. The initial allocation for the fiduciary governance component was $11 million, including a $3.5 million grant from the Netherlands. Mainly because the implementation period was extended to 30 December 2010, the allocation was increased to $19 million by project completion.

40 Appendix 4

ACCOMPLISHMENTS OF PROJECT COMPONENTS

Components Programs Main Scope Accomplishment Restoring agricultural enterprises:

Soil and land rehabilitation and management

Planting stock

Mechanization

Processing and marketing

Agribusiness development

Farming and estate crops restored on 20,000 ha of less-affected land

Farming resumed on 6,000 ha of moderately affected land and 5,000 ha of severely affected land

More than 23,000 ha of damaged farmlands cleared, inputs provided, and farming restored

Tertiary canals rehabilitated for more than 1,000 ha of damaged irrigated lands; drainage improvements and equipment such as hand tractors, threshers, and water pumps for 18,500 ha provided

Rehabilitating agricultural support services:

Capacity building for extension services

Applied research

Information systems

Coordination

Community empowerment

Self-help groups

Community information service centers

Support services (seed or breeding centers, nurseries, extension services, and distribution systems) developed for four main food crops, three main estate crops, and small ruminants; quality seeds and/or planting stock and/or breeding stock provided for 50,000 farming families

Support services and community empowerment activities implemented, including rehabilitation of livelihood support centers, seed production facilities, and other facilities

Component: Agriculture

Grant provision: $32.42 million

Contract awards: $32.42 million

Utilization: $32.42 million

Geographic coverage: Aceh: Pidie, Aceh Utara and Aceh Timur, Bireuen, Aceh Besar, Aceh Jaya, Nagan Raya, Aceh Barat Daya, and Simeulue districts

Purpose: Restore agricultural production in affected areas

Microfinance Equipment and materials provided for 200 villages to serve as demonstration sites for the main commodities

Equipment and material support provided for restoring farming on 13,200 ha of food-crop farmland, and rehabilitating or developing 4,850 ha of estate-crop farmland

Through cash for work, community contracting, and provision of inputs with participation of farmer groups, 5,700 ha of moderately and severely affected land restored to farming on the west coast, including the island of Simeulue

Capacity building of key agriculture agencies for gender mainstreaming carried out

Component: Fisheries

Grant provision: $29.82 million

Contract awards: $29.82 million

Utilization: $29.82

Community development

Empowerment of fisher and fish farming groups, and provision for 232 coastal communities

Capture fisheries

Provision of medium-sized

3,000 ha of fish and shrimp ponds restored to pre-tsunami conditions

More than 23,700 fishers, aquaculture farmers, traders, and fish sellers, including both men and women, assisted in resuming livelihoods

In aquaculture, 2,900 ha of fish and/or shrimp ponds rehabilitated for 4,800 beneficiaries and 51 hatcheries rebuilt

Two marine finfish hatcheries in Nias and

Appendix 4 41

Components Programs Main Scope Accomplishment Simeulue restored

Nearly 13,000 small-scale fishers resumed fishing.

Livelihoods grants have enabled 1,400 small-scale fish farmers to resume aquaculture with new methods such as cage farming.

Grants disbursed in 750 fishery-dependent villages, providing equipment and other inputs to enable 17,800 small-scale fishers to restart their livelihoods

Rebuilt 55 infrastructures for fisheries benefiting up to 30,000 fishers, traders, and workers

55 structures for fisheries built

16 packages of aquaculture infrastructure constructed, including 26 ponds

More than 152 medium-sized and large boats handed over to communities by March 2009

Innovative Aceh Aquaculture Communication Center established to service shrimp farmers through Internet

Four aquaculture livelihood-support centers established and run by farmers; buildings restored and equipped and farmers trained

Employment regained and/or sea-fishing livelihoods resumed by more than 1,500 fishers after delivery of 152 medium-sized and large boats with engines, fishing gear, and start-up operational capital

million

Geographic coverage: Districts of Aceh Barat, Aceh Besar, Aceh Utara, Pidie, Aceh Jaya, and Simeulue. Cities of Banda Aceh, Bireuen, and Lhokseumawe. Districts of Nias and Nias Selatan

Purpose: Restore fishery production in affected areas

to large boats

Aquaculture

Fishpond rehabilitation and restoration

Capacity development

Fishery infrastructure

Ecosystem rehabilitation

Support for local government fishery services

Eight capture fishery livelihood-support centers established and functioning

Six fishery service offices and one nongovernment office, of a traditional fishery group, or panglima laot, restored and equipped, and staff trained

Marine charts of hazards for fishers provided at three panglima laot offices on the west and east coasts of Aceh improve safety

Numerous training packages and a wide range of posters, brochures, manuals, and videos produced and distributed

Provincial and district fishery offices rehabilitated and their services strengthened through the provision of training and equipment

Innovative sonar seabed mapping for fishing, hazard, and marine current charts undertaken to benefit 3,000 fishers on both Aceh coasts

Safety at sea of around 12,000 fishers improved with radio communications installed and linked to marine police

Eight livelihood support centers for panglima laot established to provide services to 8,000 fishers

Technical and organizational training provided through 127 training packages

Nearly 1.2 million trees planted in coastal areas, with 75% estimated to survive to date

Component: MSE development

Grant provision:

1. Livelihood Fund (emergency support):

Providing affected MSEs

Cash grants provided to affected MSEs for restoring operations or starting new

In Q2 2007, Mercy Corps, an international NGO partner, completed disbursement of $1 million to 6,000 MSEs, with 35,000 indirect beneficiaries (household

42 Appendix 4

Components Programs Main Scope Accomplishment $13.85 million

Contract awards: $13.85 million

Utilization: $13.85 million

Geographic coverage: Aceh and Nias

Purpose: Provide financing to micro, small, and medium-sized enterprises through commercial and community-based financial institutions

with improved livelihoods or new livelihoods through support programs

2. Support to commercial microfinance system:

Strengthening licensed depository financial institutions in operations, product design, financial management, accounting, and auditing

ones

All 20 rural banks in Aceh province (8 private and 12 provincial government-owned) strengthened in operations, product design, financial management, and accounting

members). 27 trainers trained in MSE development, and those trainers subsequently trained 1,000 MSEs

Trained and mentored all eight private banks and the merged provincial government-owned bank in Aceh Province (PD BPR Mustaqim Sukamakmur). These banks adopted proven microfinance technique using the Grameen approach and collectively financed 5,000 clients, all women, with very high repayment rates realized and savings mobilized.

Other financing institutions, including community-based institutions, strengthened for sustainable expansion of microfinance operations

MicroBanking System for Windows, which is integrated software for microfinance institutions, installed in 19 banking units using both conventional and syariah banking modules

12 Aceh provincial government-owned rural banks merged into one bank with 12 branches, with the new bank named PD BPRM Sukamakmur

The regional government bank in North Sumatera (Bank Sumut) operating on Nias Island trained in and mentored on the Grameen banking approach. Bank Sumut provided micro grants to 1,500 women clients, with 100% collection and substantial savings mobilized.

Four trainers, 33 account officers, and 16 branch managers of PT Bank BPD Aceh trained and mentored in agriculture and fisheries lending to expand its portfolio in these sectors

3. MIF to provide funding, including short-term deposits, grants, and equity, to new or existing licensed depository financial institutions targeting MSEs

MIF established and providing participating financial institutions with market-based funds to expand their MSE portfolios

Entire MIF of $8.5 million disbursed as grants, deposits, and quasi-equity investments among eight rural credit banks and two commercial banks

An exit strategy for continued operation of MIF after the project under discussion with the Ministry of Finance and the Aceh provincial government

11 primary health-care facilities restored

Five health centers in Aceh and six health centers in Nias constructed

Component: Health

Grant provision: $11.36 million

Contract awards: $11.36 million

Utilization: $11.11

Restoration and improvement of basic health care

Enhancing capacity for district health management

Capacity for delivery of health-care services enhanced

Skill enhancement and capacity building for more than 400 nurses in tuberculosis care, clinical nursing, the management of maternal and child care, and the utilization of teaching aids for nurses and midwives

Appendix 4 43

Components Programs Main Scope Accomplishment completed

Basic skills training in mental health received by 329 nurses; 90 doctors trained, with 62 medical staff trained at the intermediate level

Medical waste management developed

Installation of incinerators in 10 district hospitals completed

Training of sanitarians completed

Disposal of 70 tons of medical waste and expired medicines from Aceh Province completed

million

Geographic coverage: Aceh and Nias

Purpose: Restore and improve health care

Capacity for planning public health programs enhanced

Center for Health Management Services constructed

Preparation of curricula and content of training courses completed

Subcomponent 1

Supplies of teaching and learning materials replenished; library facilities upgraded, including the automation of library management systems, at 395 senior secondary schools

Teaching and learning materials procured for 395 secondary schools using block grants

Procurement of computers and furniture for 349 senior secondary schools in Aceh and 46 senior secondary schools in Nias completed

Procurement of trainers and revisions to library training course and automated library system software completed

Training of 395 school librarians in Aceh completed

Component: Education

Grant provision: $16.89 million

Contract awards: $16.89 million

Utilization: $16.89 million

Geographic coverage: All districts in Aceh and Nias

Purpose: Rehabilitate and reconstruct physical facilities, and develop skills of education staff and managers

Improving quality of teaching and quality of learning environment in junior and secondary schools

Subcomponent 2:

New buildings constructed and existing buildings repaired at Sabang model senior secondary school

Construction of three classrooms, an ICT laboratory, boarding houses to accommodate 120 students, teachers’ residences, and auditorium completed

Rehabilitation of the chemistry, physics, and biology laboratories; a two-story block of classrooms; the library; and an administration block completed

Provision of equipment to three science laboratories and establishment of a fully equipped ICT laboratory with 20 networked computers, internet access, and audio-visual equipment completed

Furniture for all laboratories, classrooms, dormitories, and teachers’ residences provided and installed; sporting equipment provided

Landscaping, including playing fields, an assembly area, parking lot, internal roads, and covered walkways, completed

44 Appendix 4

Components Programs Main Scope Accomplishment Subcomponent 3:

Practical science and ICT laboratory upgraded

Construction of new science and ICT laboratories at 28 schools completed using conventional construction methods

Science and ICT laboratories at 13 schools on the west coast and at 1 school in Nias constructed using prefabricated construction methods

Science and ICT equipment for 54 laboratories 41 completed schools procured and installed

Purpose-built laboratory furniture procured and installed at all 41 schools

Technical support programs completed at all target schools

Training programs for science and ICT staff at each of the target schools completed by the end of September 2010.

Component: Rural water supply and sanitation

Grant provision: $23.5 million ($7 million from project and $16.5 million from CWSHP)a

Contract awards: $6.16 million (project only)

Utilization: $6.16 million

Geographic coverage: Pidie, Bireuen, Aceh Utara, Aceh Jaya, Nagan Raya, Nias, and Nias Selatan

Purpose: Restore rural water supply and repair damaged sanitation systems

Rehabilitating community water supply and sanitation facilities (rehabilitation phase)

Developing capacity of and training water and sanitation and hygiene staff of local governments (rehabilitation phase)

Reestablishing local government and community capacity to ensure participatory planning for facilities built

Expanding existing and constructing new water supply and sanitation facilities

Launching sanitation and hygiene behavioral change programs

About 400 systems with secure water supply and sanitation facilities constructed (200 under the project and 200 under the CWSHP)

Initial training for community facilitators on participatory assessment, facilitation, and water supply technology completed

Community action plans prepared and implemented for 244 communities in Aceh and Nias with assistance from the facilitators and district consultants (142 villages funded under the project and 102 villages funded under the CWSHP)

Water supply and communal sanitation facilities constructed in these 244 villages

Activities for sanitation and hygiene-behavioral change carried out during implementation of community action plans. A more comprehensive program was implemented in September 2009.

Component: Irrigation

Grant provision: $29.97 millionb

Contract awards: $29.97 million

Utilization: $29.97 million

Emergency repairing of key structures

Rehabilitation of systems without major structural damage

Restoration of irrigation facilities

Reconstruction of tsunami-damaged infrastructure and

Irrigated agricultural farming systems restored

Farm output of 20,600 ha of irrigated farmland restored to pre-tsunami levels by mid-2008

Farm activities on 12,000 ha of tsunami-affected irrigated farmland restored by mid-

Rehabilitation and reconstruction of irrigation infrastructure for 92 irrigation systems commanding 45,000 ha of farmland in Aceh and Nias completed

Civil works construction carried out through 129 competitively bid contracts with a total value of $15.5 million and through 492 direct-appointment community contracts with local water-user associations, with a total value of $5.6 million

Appendix 4 45

Components Programs Main Scope Accomplishment Geographic coverage: Aceh Besar, Aceh Jaya, Aceh Barat, Nagan Raya, Aceh Barat Daya, Aceh Selatan, Simeulue, Pidie, Bireuen, Aceh Utara, Aceh Timur, Aceh Tenggara, Aceh Singkil, Nias, and Nias Selatan

Purpose: Reconstruction and rehabilitation of damaged irrigation systems

rehabilitation and upgrading works in Aceh province

Strengthening of water-user associations

Strengthening of implementation and coordination facilities

Capacity building and training

2008 Irrigation infrastructure directly serving 11,400 ha of irrigated farmland on the west coast of Aceh and Nias Island severely affected by the tsunami and/or earthquakes rehabilitated. Farming on 10,200 ha of these areas resumed in 2007–2008; farming on 1,200 ha resumed in 2009.

Irrigation infrastructure directly serving 19,000 ha of irrigated farmland without major structural damage on the northeast coast and inland areas of Aceh that were conflict affected and/or had a low degree of earthquake damage rehabilitated. Farm output from these areas increased significantly above pre-tsunami levels as of mid-2008.

6,500 housing units constructed

Because of inflation, the project financed about 6,000 housing units instead of 6,500 units. Construction is completed, including new housing area of Labuy with 285 houses

1,500 housing facilities rehabilitated

About 1,400 houses rehabilitated including 660 houses in four villages in Nias and in five villages in Simeulue, and 200 traditional houses rehabilitated in selected Nias villages

Ongoing rehabilitation of the remaining 249 houses completed by July 2009

Component: Housing

Grant provision: $75.36 million

Contract awards: $75.36 million

Utilization: $75.36 million

Geographic coverage: Banda Aceh, Aceh Besar, Aceh Barat, Nias, Simeulue, Sabang, Pidie, Lhokseumawe, Nias, and Nias Selatan

Purpose: Provide affordable housing for communities and restore and update houses

Construction of new houses and rehabilitation of damaged houses for displaced persons, including for former renters

Community-related infrastructure, such as access roads, electricity, water supply, and waste treatment developed in all areas by the end of 2008

All civil works completed in December 2009

Retrofitting of sanitation facilities in 650 houses completed by March 2010

Component: Spatial planning

Grant provision: $17.01 million

Contract awards: $17.01 million

Utilization: $17.01 million

Geographic coverage: Aceh and Nias

Purpose: Build

Undertake the following activities:

Subdistrict spatial planning

Village planning

Support services for other project sectors

Environmental assessment

Ecological assessment

Geographic information systems and mapping

Environmental safeguard

Spatial planning and action plans in place for (i) rehabilitation and development in districts and subdistricts along Aceh’s north and west coasts, and on Simeulue and Nias, and (ii) infrastructure development along Aceh’s east coast

19 subdistrict action plans and 28 subdistrict spatial framework and action plans that identify core infrastructure and livelihood needs of affected subdistricts on the west coast of Aceh completed

Village planning for nearly 80 villages completed

District spatial strategies and framework plans prepared for seven districts and two cities on the northeast coast of Aceh (Aceh Besar, Pidie, Pidie Jaya, Bireuen, Aceh Utara, Lhokseumawe, Aceh Timur, Langsa, and Aceh Tamiang)

Infrastructure projects totaling $97 million

46 Appendix 4

Components Programs Main Scope Accomplishment to support priority development in 80 subdistricts prepared. These cover transportation (including fishery ports), roads and bridges, irrigation, flood protection, drainage, and water and sanitation.

Macro projections for infrastructure management funding being integrated into work programs in infrastructure rehabilitation and maintenance planning for districts and cities in Aceh

government capacity in spatial analysis and planning, and make support systems for land use decisions available

design

Impacts on environment during reconstruction phase minimized

In implementing environmental impact assessments of the project, subprojects reviewed and approved by the Extended Mission to Sumatra to ensure compliance with ADB policies and guidelines

Component: Roads and bridges

Grant provision: $32.8 million

Contract awards: $32.8 million

Utilization: $32.8 million

Geographic coverage: All coastal districts on Aceh’s east coast

Purpose: Restore road access and services in affected areas

Reconstruction of affected roads, bridges, and culverts

About 110 km of 320 km of affected roads reconstructed by 2008

Critical sections of roads and bridges restored and improved, including (i) Krueng Raya road, connecting Malahayati Port with the city of Banda Aceh; (ii) Ulee Lheue roads in Banda Aceh, which provide access from the West Coast Road and city of Banda Aceh to the Ulee Lheue ferry and fishing port; and (iii) the main east coast road from Banda Aceh to the provincial border with North Sumatra, which is the main road transportation route for goods brought in through Belawan Port in North Sumatra

The scope of works ultimately undertaken with project funding entails the reconstruction of over 72 km of road and bridge works that will improve road transportation over 450 km along the east coast of Aceh and in Banda Aceh and its environs. These comprise (i) reconstruction (widening and

resurfacing) of 72 km of road pavement, including the reconstruction of culverts and roadside drains and the reconstruction of embankment and excavation stabilization works;

(ii) construction of 1.2 km of new causeways with included culverts where loss of land resulted from the tsunami (Ulee Lheue roads);

(iii) construction of four new replacement bridges where irreparable damage was caused by the earthquake and tsunami (three on Ulee Lheue roads and one on east coast road);

(iv) construction of a new bridge superstructure with widening of one bridge (east coast road);

(v) rehabilitation and widening of existing superstructures of three bridges (east coast road); and

(vi) general repair and rehabilitation of four existing bridges (east coast road).

All civil works completed in November 2009

Component: Power

Grant provision: $9.54 million

Contract awards: $9.54 million

Utilization: $9.54 million

Rehabilitating power distribution networks and connection in Banda Aceh, Meulaboh, Sigli, and Bireuen regions

31 km of medium-voltage lines, 1,294 km of low-voltage lines, and 35 megavolt-ampere medium- and low-voltage distribution stations rehabilitated

Rehabilitation of low- and medium-voltage distribution completed

Procurement of all tools completed

Rehabilitation of Banda Aceh service building partly completed; discussions under way to ensure full completion

Appendix 4 47

Components Programs Main Scope Accomplishment Geographic coverage: Priority for rural areas in the affected parts of Aceh

Purpose: Restore power distribution networks in affected areas

Component: Fiduciary governance

Grant provision: $19.11 millionc

Contract awards: $19.11 million

Utilization: $19.11 million

Geographic coverage: Aceh and Nias

Purpose: Support fiduciary management of rehabilitation and reconstruction program

Support to BRR for establishing internal control systems covering its activities and monitoring Aceh and Nias recovery funds

Capacity building for the BPK

Restoration of internal control and funds channeling systems in the Directorate General of Treasury

Restoration of capacity of local government internal audit structures

Support for KPK

Support for financial management capacity of local NGOs

BRR’s internal control systems established and operational

Capacity of BPK improved

Provincial and district treasury systems reestablished and enhanced

Effectiveness of KPK enhanced

Effective project management, supervision, and monitoring in place

Design of internal control systems completed; systems operational since 2006

Institutional strengthening of staff at BPK headquarters and the Banda Aceh office supported; BPK’s audit of BRR’s on-budget reconstruction program partially financed through the project since FY2005

International workshops on audit practices for severe disaster events supported and funded in 2005

Special Treasury Office in Banda Aceh and Nias established through project financing. The office won the excellence award in 2006 for being the most efficient and transparent government office in Indonesia. The government plans to replicate its operations throughout Indonesia.

Funds and equipment provided to the Regional Supervisory Agency to restart operations at the provincial and district levels

Capacity-building support to KPK’s Aceh office provided until 2008. Socialization work with government, NGO, academia, and the private sector carried out

PMO established in the Extended Mission to Sumatra in mid-2005 and closed at the end of June 2009; BRR’s PMO strengthened since May 2007. With the end of BRR’s mandate in April 2009, the PMO provided support to the successor executing agency, BAPPENAS, for overseeing implementation of the remaining activities

The support program for improving the financial management capacity of local NGOs was canceled early on as other agencies provided this support.

48 Appendix 4

ADB = Asian Development Bank, BAPPENAS = Badan Perencanaan Pembanguan Nasional (National Development Planning Agency), BPK = Badan Pemeriksa Keuangan (Supreme Audit Agency), BRR = Badan Rehabilitasi dan Rekonstruksi (Rehabilitation and Reconstruction Agency), CWSHP = Community Water Services and Health Project, FY = fiscal year, ha = hectare, ICT = information and communication technology, km = kilometer, KPK = Komisi Pemberentasan Korupsi (Corruption Prevention Commission), MIF = Microfinance Innovation Fund, MSE = micro and small enterprises, NGO = nongovernment organization, PMO = project management office, Q = quarter. a ADB is administering complementary funding of $16.5 million approved under the Community Water Services and Health Aceh–Nias/North Sumatra Project financed by the governments of Canada, the Netherlands, and the United Kingdom in conjunction with an ADB grant of $65 million. ADB. 2005. Report and Recommendation of the President to the Board of Directors on Proposed Grants and Emergency Assistance Grant to the Republic of Indonesia for the Community Water Services and Health Project. Manila (Grant 0003-INO).

b Includes $1.0 million grant for Nias from the Government of Luxembourg, which supplements this project component. c Includes $3.5 million in cofinancing from the Government of the Netherlands for fiduciary governance. Source: Asian Development Bank estimates.

Appendix 5 49

PROJECT COST AND FINANCING PLAN

Table A5.1: Project Costs by Category and Component ($ million)

Appraisal Actual

Item Foreign

Exchange Local

CurrencyTotal Cost

Foreign Exchange

Local Currency

Total Cost

A. ADB Financing (Funded from the Asian Tsunami Fund) 1. Equipment and materials

a. Agriculture 2.53 6.11 8.64 0.00 9.88 9.88b. Fisheries 5.37 6.56 11.93 0.00 8.32 8.32c. Micro and small enterprises 0.10 0.05 0.15 0.00 0.14 0.14d. Health 6.30 0.70 7.00 0.00 2.26 2.26e. Education and skills

Development 0.00 2.00 2.00 0.00 5.36 5.36f. RWSS 0.00 0.00 0.00 0.00 0.00 0.00g. Housing 0.00 0.00 0.00 0.00 0.00 0.00h. Irrigation 0.22 0.00 0.22 0.00 0.17 0.17i. SPEM 0.00 0.54 0.54 0.00 0.76 0.76j. Roads and bridges 0.00 0.00 0.00 0.00 0.00 0.00k. Power 2.05 5.00 7.05 0.00 8.21 8.21l. Fiduciary governance 0.01 0.02 0.03 0.00 0.67 0.67

Subtotal 16.58 20.98 37.56 0.00 35.78 35.782. Civil works

a. Agriculture 1.87 5.80 7.67 0.00 10.39 10.39b. Fisheries 2.77 8.21 10.98 0.00 10.43 10.43c. Micro and small enterprises 0.00 0.00 0.00 0.00 0.00 0.00d. Health 1.50 7.40 8.90 0.00 3.29 3.29e. Education and skills

Development 2.00 5.90 7.90 0.00 7.44 7.44f. RWSS 0.60 7.55 8.15 0.00 2.81 2.81g. Housing 4.72 59.30 64.02 0.00 65.68 65.68h. Irrigation 5.50 21.78 27.28 0.00 21.18 21.18i. SPEM 0.00 0.00 0.00 0.00 0.00 0.00j. Roads and bridges 6.00 11.80 17.80 0.00 27.10 27.10k. Power 0.00 2.00 2.00 0.00 1.03 1.03l. Fiduciary governance 0.00 0.00 0.00 0.00 0.00 0.00

Subtotal 24.96 129.74 154.70 0.00 149.35 149.353. Consulting services

a. Agriculture 1.61 1.09 2.70 2.08 2.46 2.46b. Fisheries 0.65 0.75 1.40 3.10 0.31 3.41c. Micro and small enterprise 2.13 0.75 2.88 3.00 0.89 3.89d. Health 1.30 0.70 2.00 2.77 1.00 3.17e. Education and skills

Development 1.30 0.40 1.70 1.93 0.86 2.79

50 Appendix 5

Appraisal Actual

Item Foreign

Exchange Local

CurrencyTotal Cost

Foreign Exchange

Local Currency

Total Cost

f. RWSS 0.13 2.00 2.13 0.00 2.57 2.57g. Housing 0.32 1.26 1.58 1.25 2.17 3.42h. Irrigation 1.00 1.00 2.00 3.56 2.41 5.97i. SPEM 3.63 5.17 8.80 9.43 5.35 14.78j. Roads and bridges 0.40 0.80 1.20 2.29 2.49 4.78k. Power 0.20 0.05 0.25 0.00 0.07 0.07l. Fiduciary governance 1.18 2.91 4.09 0.51 0.89 1.40

Subtotal 13.85 16.88 30.73 29.31 21.47 50.784. Studies, surveys, community mobilization, workshops, training, NGO services, resettlement

a. Agriculture 1.85 5.58 7.43 0.00 6.67 6.67b. Fisheries 1.17 3.47 4.64 0.00 6.25 6.25c. Micro and small enterprises 1.50 0.50 2.00 0.00 0.32 0.32d. Health 1.10 2.80 3.90 0.00 1.94 1.94e. Education and skills

Development 1.50 6.50 8.00 0.00 0.89 0.89f. RWSS 0.00 0.00 0.00 0.00 0.26 0.26g. Housing 0.14 1.90 2.04 0.00 0.78 0.78h. Irrigation 0.00 1.00 1.00 0.00 1.73 1.73i. SPEM 2.20 2.93 5.13 0.00 0.53 0.53j. Roads and bridges 0.00 0.00 0.00 0.00 0.00 0.00k. Power 0.00 0.00 0.00 0.00 0.00 0.00l. Fiduciary governance 0.02 0.12 0.14 0.00 0.03 0.03

Subtotal 9.48 24.80 34.28 0.00 19.40 19.405. Project management

a. Agriculture 0.67 2.89 3.56 0.00 0.96 0.96b. Fisheries 0.04 1.01 1.05 0.00 1.41 1.41c. Micro and small enterprises 0.00 0.97 0.97 0.00 0.00 0.00d. Health 0.00 1.20 1.20 0.00 0.71 0.71e. Education and skills

Development 0.00 1.10 1.10 0.00 0.41 0.41f. RWSS 0.00 0.22 0.22 0.00 0.53 0.53g. Housing 0.00 1.86 1.86 0.00 5.31 5.31h. Irrigation 0.00 0.50 0.50 0.00 0.92 0.92i. SPEM 0.00 0.53 0.53 0.00 0.93 0.93j. Roads and bridges 0.00 0.50 0.50 0.00 0.96 0.96k. Power 0.00 0.00 0.00 0.00 0.23 0.23l. Fiduciary governance 2.05 1.19 3.24 0.00 13.67 13.67

Subtotal 2.76 11.97 14.73 0.00 26.03 26.036. Microfinance funds

a. Microfinance and Innovation Fund 0.00 10.00 10.00 0.00 8.50 8.50

Appendix 5 51

Appraisal Actual

Item Foreign

Exchange Local

CurrencyTotal Cost

Foreign Exchange

Local Currency

Total Cost

b. Livelihood Fund 0.00 5.00 5.00 0.00 1.00 1.00c. Microcredit for housing 0.00 3.00 3.00 0.00 0.00 0.00

Subtotal 0.00 18.00 18.00 0.00 9.50 9.50Subtotal (A) 67.63 222.37 290.00 29.31 261.53 290.84

B. The Netherlands Grant Cofinancing a. Fiduciary governance

i. Equipment 0.10 0.58 0.68 0.00 0.41 0.41ii. Consulting services 0.10 0.58 0.68 0.00 1.70 1.70iii. Workshop 0.10 0.90 1.00 0.00 0.02 0.02iv. Project management 0.29 0.85 1.14 0.00 1.35 1.35

Subtotal (B) 0.59 2.91 3.50 0.00 3.49 3.49Total (A+B) 68.22 225.28 293.50 29.31 265.02 294.33

C. Government Financing 1. Equipment and materials

a. Agriculture 0.00 1.86 1.86 0.00 0.00 0.00b. Fisheries 0.00 2.06 2.06 0.00 0.00 0.00c. Micro and small enterprises 0.00 0.04 0.04 0.00 0.00 0.00d. Health 0.00 0.80 0.80 0.00 0.00 0.00e. Education and skills

Development 0.00 0.00 0.00 0.00 0.00 0.00f. RWSS 0.00 0.00 0.00 0.00 0.00 0.00g. Housing 0.00 0.00 0.00 0.00 0.00 0.00h. Irrigation 0.00 0.28 0.28 0.00 0.00 0.00i. SPEM 0.00 0.17 0.17 0.00 0.00 0.00j. Roads and bridges 0.00 0.00 0.00 0.00 0.00 0.00k. Power 0.00 0.95 0.95 0.00 0.00 0.00l. Fiduciary governance 0.00 0.00 0.00 0.00 0.00 0.00

Subtotal 0.00 6.16 6.16 0.00 0.00 0.002. Civil works

a. Agriculture 0.00 0.85 0.85 0.00 0.00 0.00b. Fisheries 0.00 1.23 1.23 0.00 0.00 0.00c. Micro and small enterprises 0.00 0.00 0.00 0.00 0.00 0.00d. Health 0.00 1.00 1.00 0.00 0.00 0.00e. Education and skills

Development 0.00 0.90 0.90 0.00 0.00 0.00f. RWSS 0.00 0.90 0.90 0.00 0.00 0.00g. Housing 0.00 8.10 8.10 0.00 0.00 0.00h. Irrigation 0.00 3.02 3.02 0.00 0.00 0.00i. SPEM 0.00 0.00 0.00 0.00 0.00 0.00j. Roads and bridges 0.00 2.30 2.30 0.00 6.05 6.05k. Power 0.00 0.00 0.00 0.00 0.00 0.00l. Fiduciary governance 0.00 0.00 0.00 0.00 0.00 0.00

52 Appendix 5

Appraisal Actual

Item Foreign

Exchange Local

CurrencyTotal Cost

Foreign Exchange

Local Currency

Total Cost

Subtotal 0.00 18.30 18.30 0.00 6.05 6.05

3. Project management a. Agriculture 0.00 0.00 0.00 0.00 0.00 0.00b. Fisheries 0.00 0.00 0.00 0.00 0.00 0.00c. Micro and small enterprises 0.00 0.26 0.26 0.00 0.00 0.00d. Health 0.00 0.50 0.50 0.00 0.00 0.00e. Education and skills

Development 0.00 0.83 0.83 0.00 0.00 0.00f. RWSS 0.00 0.08 0.08 0.00 0.00 0.00g. Housing 0.00 0.63 0.63 0.00 0.00 0.00h. Irrigation 0.00 0.60 0.60 0.00 0.00 0.00i. SPEM 0.00 0.29 0.29 0.00 0.00 0.00j. Roads and bridges 0.00 0.30 0.30 0.00 0.00 0.00k. Power 0.00 0.05 0.05 0.00 0.00 0.00l. Fiduciary governance 0.00 0.00 0.00 0.00 0.84 0.84

4. Other investment costs a. Land acquisition and

resettlement 0.00 0.00 0.00 0.00 8.20 8.20b. Taxes including value-added and income tax 0.00 0.00 0.00 0.00 17.79 17.79

Subtotal 0.00 3.54 3.54 0.00 26.83 26.83Total (C) 0.00 28.00 28.00 0.00 32.88 32.88

Total Project Cost (A+B+C) 68.22 253.28 321.50 29.31 297.90 327.21

ADB = Asian Development Bank, NGO = nongovernment organization, RWSS = rural water supply and sanitation, SPEM = spatial planning and environmental management. Source: Asian Development Bank.

Appendix 5 53

Table A5.2: Project Costs by Component

($ million) Appraisal Actual

Project Components Foreign

ExchangeLocal

CurrencyTotal Cost

Foreign Exchange

Local Currency

Total Cost

Agriculture 8.53 24.18 32.71 2.08 30.36 32.44 Fisheries 10.00 23.29 33.29 3.10 26.72 29.82 Micro and small enterprises 3.73 17.57 21.30 3.00 10.85 13.85 Health 10.20 15.10 25.30 2.17 9.19 11.36 Education and skills development 4.80 17.63 22.43 1.93 14.96 16.89 RWSS 0.73 10.75 11.48 0.00 6.17 6.17 Housing 5.18 76.05 81.23 1.25 73.94 75.19 Irrigation 6.72 28.18 34.90 3.56 26.41 29.97 SPEM 5.83 9.63 15.46 9.43 7.58 17.01 Roads and bridges 6.40 15.70 22.10 2.29 36.60 38.89 Power 2.25 8.05 10.30 0.00 9.53 9.53 Fiduciary governance 3.85 7.15 11.00 0.43 19.60 19.60 Other investment costs 0.00 0.00 0.00 0.00 25.99 25.99

Total 68.22 253.28 321.50 29.31 284.21 327.21 RWSS = rural water supply and sanitation, SPEM = spatial planning and environmental management. Source: Asian Development Bank.

Table A5.3: Financing Arrangement ($ million)

Appraisal Actual

Source Total Total

Asian Development Bank through Asian Tsunami Fund 291.00a 290.84

Government of the Netherlands 3.50 3.49 Government of Indonesia 28.00 32.88 Total 321.50 327.21 a The original grant amount was $290 million provided in March 2005. The grant was increased by $1 million in October 2006 corresponding to the contribution from the Government of Luxembourg.

54 Appendix 6

IMPLEMENTATION ARRANGEMENTS, PROCUREMENT, AND DISBURSEMENT

A. Implementation Arrangements

1. The Earthquake and Tsunami Emergency Support Project was to be implemented through a central project management office (PMO) at the executing agency (EA) in coordination with separate project management units (PMUs) in line ministries. This approach created several implementation challenges because of institutional weaknesses in the government’s Reconstruction and Rehabilitation Agency (BRR) regarding coordinating reconstruction, particularly its relationship with the sectoral line agencies responsible for project implementation that were based in Jakarta, while the BRR conducted its operations from Banda Aceh. In addition, the government’s complex and changing budget procedures affected implementation. In early 2006, the BRR assumed the role of the ministerial-level implementing agencies (IAs) for all components and shifted operations closer to affected communities to increase stakeholder participation in, and local government support for, the reconstruction programs. The government also addressed institutional weakness by adopting a more flexible budgeting mechanism and streamlining coordination among project implementing and monitoring agencies.

2. Pursuant to the understanding at appraisal, the BRR established a centralized PMO in October 2005 under its deputy for fund management for implementing the project. Its main tasks included (i) providing guidelines to the PIUs on the fiduciary system, including funds flow and disbursement, procurement, record keeping, and reporting; (ii) consolidating and reviewing subproject proposals prepared by implementing units for consideration of the BRR and Asian Development Bank (ADB); (iii) providing guidance to project implementation units (PIUs) in the preparation of bidding documents, as well as reviewing the procedures followed by the PIUs in this regard; (iv) making recommendations on any special arrangements that may be adopted to provide small grants under the livelihood components to the affected communities and nongovernment organizations (NGOs) executing subprojects and on implementation arrangements for community-contracted rehabilitation; (v) submitting withdrawal applications for disbursements, including documentation and reconciliation of the imprest account; (vi) preparing consolidated financial reports to the BRR and ADB; and (vii) coordinating the independent audit of subprojects and the PMO itself. However, because of limited capacity and experience in the BRR’s PMUs and the withdrawal of line ministries by the end of 2005, the involvement of the Extended Mission to Sumatra (EMS) in overseeing the delivery of project assistance in the implementation of the various components significantly increased as implementation picked up. These changes caused some initial delays in implementation.

3. As the BRR was staffed by people seconded from various departments and agencies with limited management skills or familiarity with ADB policies and procedures, the BRR PMO faced major difficulties in supervising and managing the project. In early November 2006, the BRR reorganized its PMO to make it more operation-oriented. In May 2007, the PMO was strengthened by engaging project management advisors to coordinate and monitor the implementation of project components through respective sector directorates. The engagement of this team greatly facilitated implementation, monitoring, and progress reporting, besides streamlining coordination among many PIUs across a wide range of region and sectors. In addition, support in the form of several other advisors to BRR management was provided for overall reconstruction coordination, disaster management, housing coordination, and transition strategy formulation. After the closure of the BRR in April 2009, the PMO was placed under the

Appendix 6 55

administrative control of the National Development Planning Agency (BAPPENAS) until the closure of the project.

4. ADB established in June 2005 the Earthquake and Tsunami Emergency Support Project management office (EMO) based in the EMS to coordinate the activities of various government and aid agencies—the BRR, the Ministry of Finance, line ministries, BAPPENAS, other local government agencies—and formulate the project design and implementation framework. In addition, the EMO helped determine immediate rehabilitation needs and medium-term reconstruction needs; ensured that duplication or overlap with the efforts of other agencies and the government was minimized; compiled all relevant information on activities coordinated by the government; engaged local communities and determined their needs and preferences; prepared subprojects suitable for ADB financing including, where appropriate, the development of technical, economic, and financial criteria for the selection of subprojects; proposed environmentally friendly rebuilding designs using locally available and renewable building materials; identified safeguards requirements and conduct safeguards review and monitoring; prepared the project framework and implementation framework; conducted implementation supervision, monitoring, and contract administration; and handled grant management, disbursement, and complaints.

5. Close coordination among key players was very important in project implementation. As mandated by the grant agreement, the BRR set up an implementation coordination team for the project consisting of steering and executive teams. The steering team comprised the BRR’s deputy heads, while the executive team members included the directors concerned. The EMS liaised closely with the BRR in managing and administering the project. For strategic issues, BRR management consulted with the Southeast Asia Department of ADB and the Indonesia Resident Mission in addition to the EMS.

6. The BRR’s coordination with the EMS was mainly through the executive team, which received technical and administrative support from the PMO staffed by consultants engaged through the project. The executive team and the PMO provided guidance and oversight to PIUs or subproject managers (SPMs) that procured goods and were responsible for their delivery and the implementation of civil works and services under the project. The EMS partnered closely with the BRR and the PMO in this task. The BRR’s main partner in the government in setting policy and project priorities in consultation with ADB was BAPPENAS. To ensure the timely availability of budget for project implementation, the BRR’s deputy for finance coordinated mainly with the budget directorate of the Ministry of Finance.

7. The delegation of project administration from the sector divisions to the EMS began in October 2005. The EMO was responsible for 11 project components, while the Indonesia Resident Mission dealt with one component.1 The EMS further undertook the supervision and administration of four projects funded by the Japan Fund for Poverty Reduction. After the closure of the EMS in June 2009, project administration was entrusted to the Indonesia Resident Mission.

1 The components administered by the EMS were agriculture and fisheries, microfinance, health, education, irrigation,

housing, power, roads and bridges, spatial planning, and fiduciary governance. The resident mission was responsible for administering the rural water supply and sanitation component because of its links with the community water supply and health project being administered by it (ADB. 2005. Report and Recommendation of the President to the Board of Directors on Proposed Loans and Emergency Assistance Grant to the Republic of Indonesia for the Community Water Services and Health Project. Manila [Grant 0003-INO]).

56 Appendix 6

8. ADB’s decentralization of decision-making processes by creating the EMS and reviewing certain project decisions post facto reflected a crisis mindset throughout the reconstruction effort that prompted the adaption of usual internal procedures to evolving project requirements. Subprojects could be implemented once approved by the government and the BRR in coordination with the EMS, under the condition that ADB financing would not be provided in cases where government or ADB procedures had not been followed. This removed an entire layer of the decision-making process, enabling quicker action from project preparation and appraisal through execution.

B. Project Schedule

9. Although the project was designed to meet a portion of the funding requirements identified in the master plan for reconstruction, ADB’s program had to be aligned with works funded by other agencies. In the early stages of reconstruction, this was difficult, as both the institutional framework and the actual funding from various agencies evolved over time. Moreover, project preparation, detailed planning, designing, and contracting could commence only after consultants were mobilized to strengthen project implementation and management. All ADB requirements for economic and financial viability, community participation, social inclusion, and environmental protection had to be incorporated before undertaking physical works. Therefore, the main contracts did not get underway until 2007, almost 2 years after approval, and many of these works took almost 4.5 years to complete. Scarcity of construction materials and skilled labor also delayed implementation.

10. In March 2006, ADB agreed to engage NGOs and other partners for undertaking civil works and other construction activities, particularly for the housing component to accelerate the delivery of houses in view of the very limited implementation capacity of the BRR. However, this approach did not have the desired impact, as off-budget construction took considerable time for various reasons. The NGOs could not meet the contracted schedules because they lacked familiarity with project requirements and the skills of personnel engaged to manage the contracts in remote, inaccessible areas were limited.

11. During 2005–2006, the long, complicated chain of decision-making by ADB through its extended and resident missions and headquarters sector divisions delayed major policy decisions, contract approvals, and payments. After decentralization and delegation to the Indonesia Resident Mission and the EMS in 2007, these problems eased.

12. The grant agreement provided for ADB to engage consultants using simplified procurement procedures that allowed post-facto review and higher ceilings for community contracts, direct procurement, limited local competitive bidding and local competitive bidding. These provisions were intended to facilitate implementation, but the PIU’s lack of subproject ownership and unfamiliarity with applicable procedures affected the timeliness of procurement decisions. Adjustments in funding allocations were necessary as the scope and costs of several components increased over what was envisaged at appraisal partly because of inflation. There were also delays in detailed subproject preparation and planning related to the government decision to rebuild tsunami-damaged infrastructure to current standards rather than merely replace facilities to old specifications and standards. There were frequent changes in design during execution, particularly for the irrigation component and the roads and bridges component. These actions all took time and were reasons for the extension of the project completion date.

Appendix 6 57

C. Procurement

13. To facilitate quick response to disaster mitigation, the project provided for post-facto approval of procurement contracts, allowing subprojects to be implemented once the responsible PIU had approved the contract. However, if, during post-facto approval process, ADB found that acceptable procedures were not followed, ADB was not obliged to finance the contract and the amount taken from the imprest account would have to be refunded. This showed that ADB had great confidence and trust in the government and facilitated faster implementation of subprojects, while ADB, as the fund source, remained safeguarded from the accompanying higher risk of misappropriation as payment would be made only after the related contracts were approved. This extraordinary arrangement benefited both parties, expediting the implementation process significantly. 14. While post-facto approval of procurement enabled faster implementation of the project, it led to considerable delay in the disbursement of project funds from ADB, as the submission of relevant documents for ADB’s review was not timely. Some contracts were found to be ineligible because of the (i) lack of requisite documentation, including the minutes of the bid-evaluation meeting, bid documents, performance guarantees, or proper criteria for evaluating the bids; (ii) failure to conform with established procedures; (iii) abandonment of incomplete contracts; and (iv) output’s dysfunction. The time lag between contract award and its submission to ADB was considerable and often caused difficulty in locating the required documents, as many of the people responsible had moved to other assignments. The main reason for non-submission of documents appeared to be lack of familiarity. Because PIUs were appointed annually, they did not understand procurement procedures or seek timely replenishments from ADB, more so as the government had already prefinanced the contracts. Proper monitoring by the BRR of non-replenishment of funds could have helped initiate timely action and avoided subsequent delays. On the other hand, the alternative of requiring prior approval of contracts by ADB would have meant significant delays in executing the project.

15. The procurement of goods, services, and works conformed with ADB’s Procurement Guidelines (2010, as amended from time to time) and the procedures outlined in the grant agreement (Schedule 4). 2 ADB introduced some flexibility on thresholds and ceilings for different types of procurement and civil works contract funded under the project. These included (i) community contracting up to $30,000, (ii) direct contracting up to $100,000, (iii) limited local competitive bidding up to $500,000, (iv) local competitive bidding up to $5 million, and (v) international competitive bidding above $5 million. More than 5,000 civil works contracts were awarded. Generally, government procedures were compatible with ADB procedures, with some differences in the case of direct purchase, for which the project threshold was higher than that provided under government procedures. Community contracting, both on budget and off budget, was successfully implemented and extensively applied for the livelihood and social and community infrastructure components, including agriculture, fisheries, irrigation, rural water supply and sanitation (RWSS), education, and housing. The total value of nearly 4,000 community contracts was $42 million equivalent.

16. In addition, under a major change in implementation arrangement approved by ADB in March 2006, six contracts were awarded to international NGOs and other partners through direct selection for the off-budget construction of housing projects. These agreements, with a ceiling of $5 million each, were an innovation in ADB’s procurement system, which generally 2 Several implementing units followed the procedures prescribed in the government’s guidelines (Keputusan

Presiden, Kepres 80) issued in 2003, which are consistent with ADB guidelines.

58 Appendix 6

delegates procurement authority to governments or otherwise has much smaller agreements with NGOs, up to $100,000. Mixed experience can be observed in terms of construction quality, both for community contracting and contractor-built civil works. The housing component demonstrates that both contractor-built housing and community-contracted housing can achieve high-quality results if an assertive quality-management system, such as through implementation and oversight consultants, is in place to supervise contractors’ performance. Most community contracting required substantial support inputs from implementation consultants for on-budget works or from the oversight consultant to the NGOs for off-budget works. The housing component thus demonstrates that community contracting is a viable alternative to commercial contracting, provided that adequate support and supervisory arrangements are in place.

17. The post-facto review and approval process allowed the implementation of most components within the EA’s timeframe. On-budget procurement was all local and for the most part applied government procedures. However, despite the flexibility provided in the grant agreement, most implementing units were reluctant to use ADB’s fast-track procurement procedures, as they were not in line with government procedures. Others adopted procedures outside of the norm because of lack of familiarity and experience. Some PIUs did not comply with documentation and administrative aspects of procurement. As a result, procurement and post-facto review by ADB were time consuming, as contracts and other documents were not provided. Despite these difficulties, only 50 contracts for a total value of $5.2 million were ineligible for project funding and were financed instead by the government. A summary of civil works and other contracts is in Appendix 12. All payments to contractors and suppliers on-budget were made through imprest accounts, while direct disbursement procedures were followed for payments for consulting services and off-budget housing contracts.

18. The consultants engaged by ADB assisted in the preparation of feasibility studies, environmental assessments, community action and resettlement plans, economic evaluation, design and tender documents, bid evaluations, and construction supervision. Community organizers were engaged to assist with needs assessments, community awareness, and the implementation of livelihood restoration and social sector rehabilitation programs. The project was to provide 626 person-months of international consultancy and 3,083 person-months of domestic, at an estimated cost of $30.9 million. However, a significant amount of additional consultancy was required to replace the lack of government staff for planning, design, and construction supervision, as well as for component and overall project management over an extended implementation period of 5 years, not 3 years as at appraisal. A total of 9,986 person-months of consulting services were provided (1,407 person-months provided by international consultants and 8,459 person-months by national) at a cost of $73.7 million.

19. Partly because they were directly engaged by ADB, consultants were confined to an assisting role in their collaboration with the IA, rather than the more normal task role.3 This caused difficulty in preparing and implementing the component. The consultants could not always ensure the adherence of PIUs or SPMs to the scope of work in the approved subproject preparation reports or directly control the quality of construction. They were not authorized to certify the works as complete or the contractors’ monthly certificates as payable, as these functions were the sole responsibility of the PIU and SPMs. These shortcomings were

3 The BRR wanted consultants to take more direct responsibility for supervising implementation, but it was

recognized that there would have been legal implications from adopting this approach without the formal empowerment of consultants by an agreement between the BRR and ADB. The BRR made no proposals as to how the consultants would be authorized in this respect, and no further action was taken.

Appendix 6 59

exacerbated by the BRR PIU and SPMs not always following consultants’ recommendations and advice.

20. With few exceptions, the performance of international firms and individuals was at least satisfactory; when changes in the teams were necessary, as in the education and spatial planning components, they were made expeditiously. In RWSS, initial consultant performance was impeded by an over-complex organizational structure and unclear and partly overlapping responsibilities. Of the seven consulting service packages in the spatial planning and environmental management (SPEM) component, only one, on village planning, was completed on schedule and considered satisfactory, while the execution of the other packages was protracted and the late submission of deliverables necessitated extended completion dates. The implementation of one package was affected by an investigation of alleged corruption that proved baseless. Administrative issues relating to another package caused its termination midway through the subcomponent. The remaining activities were completed through another package that was also extended because of poor management. The need to extend the duration of the project was not caused by underperformance of any of the consultants but by delays in subproject startup and the delayed release of local government funds. In some cases, that only involved additional advisory services by expanding scope by BRR and related agencies taking advantage of the flexible approach practiced by ADB.

21. The performance of the domestic consultants under most components was generally satisfactory. In the power component, local consultant performance was rated highly satisfactory mainly because of their close links with the sector institution. In RWSS, initially poor performance improved with a change of management in 2008. SPEM local consultant performance was satisfactory except in the package on infrastructure planning, for which they found the required advisory role difficult and not cohesive. The engagement of Bina Swadaya to provide support for community development in the agriculture, fishery, and irrigation components did not prove effective.

D. Disbursement

61. Table A6.1 summarizes each component in terms of contract commitments and utilization of current allocation. The trend in contract awards and utilization since 2005 is shown in Figure 1.4 Total commitment and utilization at project completion at the end of December 2010 was $294.3 million and disbursement from ADB was $289 million, with the disbursement of the rest under processing. The main reason for the significant gap between utilization and disbursement was the delayed submission by the BRR and its implementing units of documentation required for ADB’s post-facto procurement reviews, as disbursement was contingent on the completion of these reviews. Project design provided for directly funding consulting services contracts awarded by ADB on behalf of the Government, and for post-facto review by ADB of procurement documents, as opposed to the prior review that is applied to most projects. However, while the documentation was collected and submitted to ADB for processing, government resources were utilized to fund any contracts that were awarded, in accordance with the ADB and government guidelines. ADB worked with the BRR and, since April 2009, with its successor agency, BAPPENAS, to expedite the submission of documents to

4 Utilization includes all project expenditures incurred by the government using funds from the imprest account or its

own resources, as well as direct payments by ADB. The difference between utilization by the government and disbursement by ADB is prefinancing by the government while the procurement review continued and further processing of disbursement documents followed.

60 Appendix 6

accelerate disbursement and shorten the disbursement lag. In addition, and in consultation with the BRR, ADB used off-budget direct contracts to expedite housing construction.

Table A6.1: Performance of Project Componentsa Allocationb Contracts Utilization Contracts UtilizationComponent

($ million) ($ million) ($ million) (%) (%) Agriculture 32.42 32.42 32.42 100.00 100.00 Fisheries 27.02 29.82 29.28 110.36 108.36 Micro and small enterprises

13.73 13.85 13.85 100.87 100.87

Health 11.45 11.36 11.36 99.21 99.21 Education 16.15 16.89 16.89 104.58 104.58 RWSS 6.32 6.16 6.16 97.47 97.47 Housing 73.72 75.36 75.36 102.22 102.22 Irrigationc 29.68 29.97 29.97 100.98 100.98 SPEM 17.12 17.01 17.01 99.36 99.36 Roads and bridges 38.83 32.84 32.84 84.57 84.57 Power 9.57 9.54 9.54 99.69 99.69 Fiduciary oversight (ATF)

14.99 15.62 15.62 104.20 104.20

Project Total 291.00 290.84 290.30 99.95 99.76 Fiduciary oversight (Netherlands grant)

3.50 3.50 3.49 100.00 99.82

Total 294.50 294.34 293.79 99.95 99.76 ATF = Asian Tsunami Fund, RWSS = rural water supply and sanitation, SPEM = spatial planning and environmental management. a As of end of December 2010.        b After reallocation resulting from program review in August 2010.  c Includes the Luxembourg contribution of $1 million to the ATF. Source: Asian Development Bank.

 

               

                                                                                                                                    

0.5  0.3         0.3  0.3         

0.15  0.25         0.05  0.15         

            

Source: Asian Development Bank.        

Appendix 6 61

62. ADB’s post-facto review of procurement and disbursement documents noted that several contracts in various components that together were worth $6.1 million equivalent would not be eligible for project funding because of lacking documentation, nonconformity with established procedures, and/or civil works being incomplete or dysfunctional. This was mainly due to institutional weaknesses, a lack of understanding of ADB and government procurement procedures by project personnel assigned from various agencies, inadequate supervision and monitoring of procurement, and ineffective contract administration. The government used its funds to finance expenditures against such contracts.

63. Table A6.2 shows commitment and utilization against grant allocation categories. The initial allocation for all components was adjusted during implementation in response to evolving reconstruction needs. The provision of consulting and auditing services was increased substantially in response to the limited capacity of the BRR’s PIUs. This reflected the project’s emphasis on proper project preparation, monitoring, and capacity development to ensure sustainability.

Table A6.2: Utilization of Grant Proceeds Against Allocationa

Allocationb Contract Award Utilization Reallocated Grant Categories

($) Amount ($) % Amount ($) % Civil works 149,334,700.00 149,361,629 100.0 149,361,629 100.02

Equipment, materials, and vehicles 32,626,084 36,186,553 110.9 36,186,553 110.91

Microfinance fundsc 9,498,200 9,498,200 100.0 9,498,200 100.00

Studies, surveys, community mobilization, workshop and training, and NGO services

19,584,400 19,408,885 99.1 19,408,885 99.10

Consulting and auditing services 62,506,339 52,494,771 84.0 52,494,771 83.98

Microcredit for house expansiond 0 0 0.0 0 0

Project management (ATF) 17,450,277 23,885,689 136.9 23,885,689 112.96

Project Total 291,000,000 290,835,727 98.04 290,835,727 99.944

Project management (Netherlands grant)

3,500,000 3,493,774 99.8 3,493,774 99.82

Total 294,500,000 294,329,501 98.06 294,329,501 93.56

ATF = Asian Tsunami Fund, NGO = nongovernment organization.         a As of end of 15 August 2010.          b After reallocation resulting from program review in August 2010.      c Includes the Microfinance Innovation Fund.          d A separate microcredit facility for housing expansion was not pursued because of limited demand and the complexity of implementation. Source: Asian Development Bank.

62 Appendix 7

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Appendix 8 63

ORGANIZATIONAL FRAMEWORK FOR RECONSTRUCTION MANAGEMENT

BRR = Agency for Rehabilitation and Reconstruction, ETESP = Earthquake and tsunami Emergency Support Project, PMO = project management office

64 Appendix 9

Figure A9.1: Policy and Program Coordination for ETESP

Figure A9.2: Government Internal Processing and Coordination

Figure A9.1: Implementation Coordination Between BRR and ADB

ADB AND GOVERNMENT INTERFACE ON PROJECT MANAGEMENT

Notes: BAPPENAS = National Development Planning Agency, BRR = Agency for Rehabilitation and Reconstruction, EMS = Extended Mission to Sumatra, ETESP = Earthquake and Tsunami Emergency Support Project, SERD = Southeast Regional Department

Appendix 10 65

STATUS OF COMPLIANCE WITH COVENANTS

Project-Specific Covenants Reference in Grant Agreement Status of Compliance

Project Executing Agency

The Project Executing Agency (EA) shall be the Aceh Rehabilitation and Reconstruction Implementation Coordination Board (BRR)a and shall be responsible for its overall management and coordination. In the interim, the National Development Planning Agency (BAPPENAS) shall function as the EA. The Recipient shall ensure that once BRR is established the role and responsibility of the EA shall be transferred from BAPPENAS to BRR.

Schedule 5, para. 1 Complied with. The BRR was established in May 2009 and immediately assumed responsibility as EA from BAPPENAS. The latter again took over the role of EA on 16 April 2009 when the BRR’s mandate expired.

Project Management Office

The Recipient shall establish a dedicated, centralized project management office (PMO) within the secretariat of BRR to (I) coordinate the implementation of the Project; (ii) align ADB's support with the principles of the Disaster Management Rehabilitation and Reconstruction (DMRR) strategy; (iii) enhance synergies and ensure sound coordination of ADB's support with the implementation of the Multidonor fund (MDF) and projects supported by other development partners; and (iv) provide guidance to, and monitor the activities of the project management units (PMUs). The PMO shall be headed by a dedicated manager and shall by supported by a team of staff. The PMO manager shall report to the chief of BRR.

Schedule 5, para. 2 Complied with. Established in August 2005, the BRR PMO was strengthened in 2007 for efficient overall management and coordination. Projectsupport under the fiduciary governance component was provided to strengthen the BRR PMO. This support continued after the transfer of the PMO to BAPPENAS.

The PMO shall be responsible for (i) providing guidelines to the PMUs on the fiduciary system, including funds flow and disbursement, procurement, record keeping and reporting; (ii) consolidation and review of subproject proposals from the Implementing Agencies (IAs); (iii) providing guidance to the PMUs in the preparation of bidding documents and reviewing the procedures undertaken by the PMUs on the procurement of civil works, equipment, goods and related services; (iv) making recommendations on any special arrangements that may be adopted to provide small grants under the livelihood components to the affected communities and non-government organizations (NGOs) executing selected subprojects, and implementation arrangements for community contracted rehabilitation activities; (v) submitting withdrawal applications for disbursements including the related supporting documentation and reconciliation of the imprest account; (vi) preparation of the consolidated financial reports from the PMUs; (vii) preparation and submission of progress reports to BRR and ADB; and (viii) coordinating the independent audit of subprojects and the PMO.

Schedule 5, para. 3 Complied with. The PMO performed these tasks with the assistance of consultants.

Implementing Agency Project Management Units

A project management unit (PMU) shall be established in each IA to coordinate with PMO. The PMUs, shall closely liaise with the local government in formulating subproject and

Schedule 5, para. 5 Complied with. PMUs were established for each component and functioned under the overall supervision

66 Appendix 10

Project-Specific Covenants Reference in Grant Agreement Status of Compliance

shall finalize and, in coordination with PMO, consolidate sector proposals for submission to BRR for evaluation, and ensure that the guidelines and procedures established by the PMO are followed and all operational and fiduciary requirements of the Project are met in a satisfactory manner. All the financial and project management tasks outlined for PMO shall be applicable to the PMUs.

of the BRR.

Subproject selection criteria and approval process The Recipient shall ensure that all subprojects meet the agreed selection criteria, and implementation arrangements, and that all subprojects are properly monitored to the satisfaction of ADB.

Schedule 5, para. 6 Complied with. The BRR reviewed and endorsed subproject proposals prepared by project implementing units (PIUs) with the help of component consultants to ensure compliance with agreed selection criteria.

BRR, through the PMO with support from the PIUs will consolidate proposals for subprojects from the local governments, ministries, and its own departments for consideration for financing under the Project. The PMU will compile and conduct screening of the proposals and will submit them to BRR and ADB for final selection and approval in accordance with the indicative sector specific criteria to be agreed upon by the Recipient and ADB for each project component.

Schedule 5, para. 7 Complied with. The BRR and ADB agreed to an arrangement whereby subproject proposals were submitted by the implementing units to the PMO in the BRR and ADB’s Extended Mission to Sumatra (EMS). The BRR used this mechanism to monitor implementation so that subprojects met the agreed criteria.

The Recipient shall ensure that the subprojects being evaluated and approved do not overlap or duplicate initiatives supported by other agencies. In addition to the sector-specific criteria, the following criteria will apply for all subprojects: (i) clear justification backedby damage, loss and needs assessment of acceptable quality and standards; (ii) social and economic impacts of the subprojects, and their technical feasibility and sustainability with linkages of subprojects to the attainment of Millennium Development Goals (MDGs) outlined; (iii) participatory consultations with local communities in the selection and design of the proposed subprojects; (iv) field consultations with local governments, line ministries, donors, civil society organizations (CSOs) and NGOs to provide justification that the proposed subproject do not duplicate other activities pursued; (v) compliance with generally accepted design parameters, including disaster resistance and any minimum acceptable standards that the Recipient may prescribe; (vi) compliance with ADB’s safeguard policies and provisions including the Recipient’s environmental requirements, ADB’s Environment Policy (2002), ADB’s Environmental Assessment Guidelines (2003); and (vii) subprojects involving land acquisition and/or resettlement shall be prepared in accordance with the Recipient’s applicable laws and regulations, ADB’s Policy on Involuntary Resettlement (1995).

Schedule 5, para. 8 Complied with. All subprojects were in compliance with applicable criteria.

Subproject proposals shall be prepared by the PMU in the form agreed by the Recipient and ADB. The PMU shall be responsible at the preparation, submission, implementation, and benefits monitoring and evaluation stages. The first 3 subprojects under each

Schedule 5, para. 9 Complied with. All subprojects irrespective of the specified thresholds were prepared by PIUs and coordinated by the IAs in accordance with the formats developed by the EMS for subproject

Appendix 10 67

Project-Specific Covenants Reference in Grant Agreement Status of Compliance

component to be carried out will be subject to prior review and approval by ADB. Subsequent subprojects costing more than $500,000 equivalent must be submitted to ADB for prior review and approval. Any subproject below $500,000, which does not meet the subproject selection criteria shall not use the proceeds of the Grant. In such event, the Recipient shall provide financing from its own or other resources. Except for subprojects costing more than $10,000,000, all subproject proposals shall be submitted for ADB’s review and approval by 30 September 2007. Subprojects costing more than $10,000,000 shall be submitted at the latest by 31 December 2006.

appraisal and preparation reports. Most subproject preparation activities started in 2006 and were completed by 2007 or 2008 and executed during 2006–2009.

Environment The Recipient shall ensure that adequate environmental mitigation measures in accordance with (a) the Recipients environmental laws and regulations and (b) ADB's Environmental Policy (2002) are incorporated into all subproject designs and implementation. The Recipient shall ensure that the agreed Environmental Assessment and Review Procedures, as described in Attachment 1 to Schedule 5 shall be strictly complied with.

Schedule 5, para. 15 Complied with. The subproject proposals were reviewed by Aceh or North Sumatra's regional agencies for environmental impact mitigation and by the EMS to ensure compliance with the recipient's and ADB’s policies.

Social Community participation

The Recipient shall ensure that BRR and each of the IA shall actively seek community participation in the subproject design, implementation and O&M of all works carried out under the Project. The Recipient, through the BRR and the IAs shall engage, to the extent possible, CSOs and NGOs for subproject implementation as well as monitoring.

Schedule 5, para. 10 Complied with. Community and NGO relations consultants engaged under different components actively engaged community participation in the design of subprojects and participatory community monitoring of implementation activities.

Resettlement and Land Acquisition. The Recipient shall ensure that the relocation of the displaced persons shall be completed as per the Recipients policy framework and procedural guidelines applicable to the Project, which are outlined in the agreed Land Acquisition and Resettlement Policy Framework and Procedural Guidelines (LARPFPG) described in Attachment 2 to Schedule 5 of the Grant Agreement.

Schedule 5, para. 12 Complied with. Appropriate community action plan (CAP) and land acquisition and resettlement action plan (LARAP) procedures consistent with ADB policies and guidelines were in place throughout implementation.

The Recipient shall ensure that, to the extent possible, subprojects shall avoid involuntary resettlement. In the event involuntary resettlement is required for any subproject, then the Recipient shall prepare a land acquisition and resettlement plan in accordance with the Recipient's applicable laws and regulations, ADB’s Policy on Involuntary Resettlement (1995) and the agreed LARPFPG. In case of discrepancies between the Recipient's laws, regulations, and procedures and ADB's requirements, ADB's requirements shall apply. The land acquisition and resettlement plan for a subproject shall be submitted to and approved by ADB prior to the award of a civil works contract for that subproject. The resettlement plan shall be disclosed to affected persons and project reporting shall provide information on resettlement. The Recipient shall ensure that the agreed LARPFPG and land

Schedule 5, para. 13 Complied with. In most cases, subproject location and alignments were revised to avoid or minimize involuntary resettlement. All CAPs and LARAPs were submitted to the EMS for review and approval prior to commencement of civil works for the related subproject. The resettlement plans were disclosed to affected people. The agreed LARAPs were complied with by the implementing units.

68 Appendix 10

Project-Specific Covenants Reference in Grant Agreement Status of Compliance

acquisition and resettlement plan shall be strictly complied with. The Recipient shall ensure that no civil works contract shall be awarded in any area prior to payment of compensation and resettlement assistance as specified in the LARPFPG.

Schedule 5, para. 14 Complied with. In those subproject areas that required resettlement, the BRR used government funds for payment of compensation while proceeding with civil works. Project funds were also utilized for compensation payments.

Indigenous Peoples The Recipient shall ensure that to safeguard the interest of indigenous peoples, measures are undertaken to promote full participation of indigenous peoples in the Project. The Recipient shall further ensure that subproject activities are carried out in accordance with ADB's Policy on Indigenous Peoples and in accordance with the Indigenous Peoples Development Framework, which has been agreed by the Recipient and ADB.

Schedule 5, para. 16 Complied with.

Gender and Development The Recipient shall ensure that the Project is implemented in accordance with the Gender Action Plan agreed with ADB and ADB's Policy on Gender and Development (1998). Specifically, the Recipient shall ensure that (a) women are well represented within decision-making processes and structures for post tsunami rehabilitation and reconstruction; (b) women receive specific support for livelihoodrestoration, and develop business and entrepreneurial skills; and (c) women's specific needs for safe water and sanitation, shelter, material and child health care, reproductive health are well addressed.

Schedule 5, para. 17 Complied with. Community consultations and subproject beneficiaries included both women and men. Gender mainstreaming was undertaken in livelihood and social infrastructure components.

Governance and Transparency Consistent with its commitment to good governance, accountability, and transparency, ADB shall have the right to conduct spot audits at any time during the project implementation to determine the degree to which Project funds have been effectively and efficiently utilized to implement the Project and achieve its objectives, outputs and performance indicators. ADB shall also have the right to investigate any possible financial or management impropriety in conducting the Project. The Recipient shall cooperate with any such audit and investigation and extend necessary assistance, including access to all relevant books and records, as well as engagement of independent auditors and experts that may be needed for satisfactory completion of such audits and investigations. All external costs related to the audits and investigations shall be funded from the grant.

Schedule 5, para. 18 Complied with. PMO conducted performance and financial audits on the utilization of funds on subprojects. BRR also undertook investigations on a few consulting services contracts. All audits were funded from the grant proceeds.

ADB shall have the right to conduct a “special audit” focusing on governance; financial accountability (e.g., certification of accounts); and transparency soon after the completion of the Project.

Schedule 5, para. 19 Not applicable.

Appendix 10 69

Project-Specific Covenants Reference in Grant Agreement Status of Compliance

The PMO, supported by consultants and in coordination with PMU, shall make available on the website for the Project information on how the funds are being used for the intended beneficiaries following applicable procedures. The website will present financial statements and track procurement contract awards, and include information on, among others, the list of participating bidders, name of the winning bidder, basic details on bidding procedures adopted, amount of the contract awarded, the list of goods and/or services purchased, and their intended and actual utilization.

Schedule 5, para. 20 Complied with. The PMO made available all information on the utilization of grant funds through the website maintained by the BRR and by the Special Treasury Office.

Financial Accounts and Audits The PMO and PMUs shall maintain separate records and accounts for each subproject, adequate to identify the goods and services financed by the Project. Consolidated project accounts and related financial statements will be audited annually by independent auditors acceptable to ADB. The audited reports and related financial statements will be submitted to ADB not later than nine months after the end of the fiscal year (31 December) to which they relate.

Schedule 5, para. 21 Delayed compliance. Given the difficulties associated withconsolidating grant expenditures by the BRRand its implementing units and by ADB onbehalf of the BRR for consultants engaged byADB and payments for off-budget partners, thegrant agreement was amended in January2008 to clarify that the recipient would furnishaudit reports covering only on-budgetexpenditures made by its agencies, while ADBwould furnish audit reports on off-budgetexpenditures made by ADB.

Project accounts were audited by the BPK andfunded under the fiduciary governancecomponent. Audited project accounts weresubmitted to ADB, with several months’ delay.Initially the grant agreement required thesubmission of audited accounts and reportswithin 6 months. This provision was amendedto 9 months in 2008, yet this covenant has stilnot been complied with in a timely manner.

All project activities shall be subject to independent performance audit to ensure transparency of objective and independent assessment of such activities. The performance audit shall be conducted annually and randomly during project implementation and be carried out by external auditors selected by BRR in consultation with ADB.

Schedule 5, para. 22 Complied with. Annual audits were funded under the fiduciary governance component.

Cash and In-Kind Assistance The Recipient shall ensure that cash and in-kind assistance provided to individual beneficiaries under the Project shall be against suitable identification and verification in accordance with arrangements agreed between ADB and the Recipient; all records, receipts, certificates and other documents related to the cash and in-kind assistance will be properly maintained and made available to ADB at any time; in case of support on a retroactive basis, the concerned line ministries, agencies or local governments shall produce clear documentation on the policies adopted, mechanisms for delivery of support, and identification process.

Schedule 5, para. 23 Complied with. Cash grants supported under the small and microenterprises components were distributed through an NGO. These accounts were audited by an independent auditor. All records for cash and block grants provided under the livelihood and social infrastructure components are kept by the EA.

70 Appendix 10

Project-Specific Covenants Reference in Grant Agreement Status of Compliance

Reports The PMO and PMUs shall prepare brief progress statements, in a format to be agreed between the Recipient and ADB, and submit these to BRR and ADB at the end of each month. In addition, the PMUs shall submit quarterly reports to BRR and ADB. Within 6 months of physical completion of the Project, the Recipient shall provide ADB through BRR an overall project completion report providing detailed evaluation of project design, costs, contractor and consultant performance, social and economic impact, and other details as requested by ADB.

Schedule 5, para. 24 Complied with. The BRR and BAPPENAS PMO funded under the fiduciary governance component submitted brief progress reports. At the request of BAPPENAS, consultants assisted in the preparation of completion reports for the 12 projectcomponents. The PMO also submitted a completion report to ADB and the EA. ADB’s PMO at the Indonesia Resident Mission coordinated with BAPPENAS PMO advisors in preparing the project completion report based on the component completion reports prepared with the assistance of consultants.

The BRR, through the PMO, shall carry out project performance monitoring and evaluation in accordance with ADB's Project Performance Monitoring and Evaluation Handbook. Baseline indicators and targets for each sector and subproject shall be developed prior to implementation for monitoring purposes as well as for checking against selection criteria. Monitoring and evaluation requirements shall be applied in a flexible manner.

Schedule 5, para. 25 Complied with. Subproject preparation documents provide baseline information for performance monitoring. Performance monitoring was mainly undertaken by EMS PMO advisors.

Grievance Mechanism A mechanism shall be put in place to quickly sanction private individuals or public officials who either misappropriate funds or take advantage of the vulnerability of the tsunami-affected people in the Project Provinces. Further, governance redress mechanisms shall be put in place to deal with citizen grievance against anyone taking advantage of the situation, as well as alternative dispute resolution mechanisms to settle private disputes. To that end, within 3 months of the Effective Date, the Recipient shall establish a grievance review and resolution mechanism within the BRR. The grievance review and resolution mechanism shall be responsible for (a) reviewing and addressing grievances of citizens, beneficiaries and other stakeholders of the Project, in relation to either the Project, any of the service providers, or any person responsible for carrying out any aspect of the Project; and (b) establishing the threshold criteria and procedures for handling such grievances, for proactively and constructively responding to them, and for providing the public with notice of such mechanism, including publishing notices in newspapers. Such criteria and procedures shall be subject to ADB’s approval. The Supervisory Board (Badan Pengawas) of the BKP shall be responsible for the mechanism and a dedicated full-time professional staff of BKP shall be appointed. This staff shall report directly to the Head of the Supervisory Board of the BRR, who in turn will report directly to the Chief of BRR.

Schedule 5, para. 27 Complied with. Grievance focal points were appointed in the BRR and project component teams. Training on grievance resolution was organized. Grievances and complaints that were received were processed and genuine ones addressed.

Appendix 10 71

Project-Specific Covenants Reference in Grant Agreement Status of Compliance

To enable individuals or communities to use such mechanisms and to access assistance under the Project, this grievance review and resolution mechanism shall be made public, and a facilitation unit shall be established in coordination with CSOs and/or NGOs.

Schedule 5, para. 28 Complied with. The facilitation mechanism was agreed through a facilitation unit in the BRR. The unit was operational from early 2007 until March 2009.

ADB = Asian Development Bank, BAPPENAS = National Development Planning Agency, BPK = Supreme Audit Agency, BRR = Agency for Rehabilitation and Reconstruction, CAP = community action plan, CSO = civil society organization, DMRR = disaster management rehabilitation and reconstruction, EMS = Extended Mission to Sumatra, EA = executing agency, LARPFPG = Land Acquisition and Resettlement Policy Framework and Procedural Guidelines, MDF = Multi-Donor Fund, PMO = project management office, IA = implementing agency, PMO = project management office, PMU = project management unit. a According to the grant agreement, the recipient’s proposed Aceh–North Sumatra Implementation Coordination Board

for Rehabilitation and Reconstruction was to be the EA. Instead, the government established the Reconstruction and Rehabilitation Agency (BRR) for the purpose.

72 Appendix 11

International National TotalA. FirmsAgriculture Uniconsult International Limited 65.00 132.00 197.00 1,997,278

Bina Swadaya 0.00 2,193.36 2,193.36 3,501,561Fisheries National Aquaculture Association 54.50 397.04 451.54 3,247,540

National Aquaculture Association 15.38 170.78 186.16 1,971,405SME Snowy Mountains Engineering 123.92 149.31 273.23 4,198,568Health Access UTS Pty Limited 110,849

Jane Thompson Associates Inc 2.23 20.88 23.11 683,482HB Consultant 27.17 195.49 222.66 1,545,771

Education Illawara Technology Corporation 17.48 14.32 31.81 561,629Illawara Technology Corporation 337,227Uniconsult International Limited 41.03 81.65 122.68 2,069,672

RWSS Miskat Alam Konsultan … … … 494,001GRM International … … … 1,967,680

Housing Inti Hexa Semesta 9.10 125.20 134.30 1,083,159Inacon Luhur Pertiwi 0.00 412.46 412.46 2,808,428Multi Area Conindo 0.00 223.60 223.60 1,170,718Multi Area Conindo 0.00 232.60 232.60 1,269,790Multi Area Conindo 0.00 192.13 192.13 1,050,930

Irrigation Halcrow Group Ltd. 129,329 Black and Veatch 47.67 521.86 569.53 4,463,194Black and Veatch 12.40 199.63 212.03 1,406,769Multi Teknitama Prakarsa 0.00 125.33 125.33 928,288

SPEM Sinclair Knight Merz 75.20 162.10 237.30 2,944,021Multi Area Conindo 15.64 391.38 407.02 1,254,180Black & Veatch 186.08 953.67 1,139.74 4,362,354Sinclair Knight Merz 78.17 137.54 215.71 3,396,250Syiah Kuala University 0.00 25.00 25.00 162,200South East Consortium for International 30.82 120.75 151.57 1,360,624Sinclair Knight Merz 56.61 186.50 243.11 2,503,681

Roads and bridges Dainichi 21.50 113.50 135.00 1,062,499Sheladia 17.09 143.70 160.79 1,315,907Technoconsult Internatjonal Limited 24.35 57.55 81.90 740,607Sheladia 28.50 209.00 237.50 1,616,850

Fiduciary governance Ernst & Young 8.00 16.00 24.00 478,741Osana Lestari Konsultan … 181.65 181.65 2,888,600Ernst & Young … … … 867,691Kap Doli … … … 27,408Pricewaterhouse Coopers … … … 95,000Syiah Kuala University … 46.00 46.00 89,200Remdecotama Swaprakarsa … 17.00 17.00 129,030Syarief Basyir & Rekan … … … 55,888

Sub Total 957.84 8,148.99 9,106.82 62,347,999B. Individuals

Advisory support to executing agency 47.87 15.60 63.47 1,353,283Advisory support to components 72.16 87.34 159.50 2,937,548Advisory support for project management 329.26 211.57 540.83 9,482,065

Sub total 449.29 314.51 763.80 13,772,897Total 1,407.13 8,463.50 9,870.62 76,120,895

Source: Asian Development Bank.

Total Cost ($)

Component Consulting Firms

STATUS OF CONSULTING SERVICES CONTRACTS

Input in person-months

RWSS = rural water supply and sanitation, SME = small and microenterprises, SPEM = apatial planning and environmental management

Appendix 12 73

SUMMARY OF CONTRACT DETAILS Table A12.1: Contracts Executed On-Budget

No. Rp million $ million No. Rp million $ million % No. Rp million $ million %

CC 767 85,740 10 767 85,740 10 100.0 0 0 0 0.0LCB 118 173,307 19 97 148,622 17 85.8 21 24,685 3 14.2

LLCB 28 84,578 9 28 84,578 9 100.0 0 0 0 0.0DP 218 42,253 5 217 41,959 5 99.3 1 294 0 0.7

1,131 385,878 43 1,109 360,899 40 93.5 22 24,979 3 6.52,007 CC 2,004 159,507 18 2,004 159,507 18 100.0 0 0 0 0.0

LCB 229 395,039 44 222 385,684 43 97.6 7 9,355 1 2.4LLCB 46 108,767 12 42 97,494 11 89.6 4 11,273 1 10.4

DP 171 11,768 1 170 11,700 1 99.4 1 68 0 0.62,450 675,081 75 2,438 654,385 73 96.9 12 20,696 2 3.1

CC 1,137 128,303 14 1,137 128,303 14 100.0 0 0 0 0.0LCB 101 178,876 20 94 175,276 19 98.0 7 3,600 0 2.0

LLCB 120 88,923 10 120 88,923 10 100.0 0 0 0 0.0DP 138 15,241 2 136 14,237 2 93.4 2 1,004 0 6.6

1,496 411,343 46 1,487 406,738 45 98.9 9 4,604 1 1.1CC 16 2,589 0 16 2,589 0 100.0 0 0 0 0.0LCB 0 0 0 0 0 0 0.0 0 0 0 0.0

LLCB 0 0 0 0 0 0 0.0 0 0 0 0.0DP 7 1,690 0 7 1,690 0 100.0 0 0 0 0.0

23 4,279 0 23 4,279 0 100.0 0 0 0 0.05,100 1,476,581 164 5,057 1,426,302 158 96.6 43 50,279 6 3.4

CC 449 38,934 4 449 38,934 4 100.0 0 0 0 0.0LCB 50 60,002 7 43 45,260 5 75.4 7 14,742 2 24.6

LLCB 0 0 0 0 0 0 0.0 0 0 0 0.0DP 194 36,788 4 194 36,788 4 100.0 0 0 0 0.0

693 135,725 15 686 120,983 13 89.1 7 14,742 2 10.9CC 221 34,438 4 221 34,438 4 100.0 0 0 0 0.0LCB 27 41,601 5 15 32,363 4 77.8 12 9,238 1 22.2

LLCB 0 0 0 0 0 0 0.0 0 0 0 0.0DP 12 639 0 11 346 0 54.0 1 294 0 46.0

260 76,678 9 247 67,147 7 87.6 13 9,532 1 12.4CC 82 9,342 1 82 9,342 1 100.0 0 0 0 0.0LCB 28 34,632 4 26 33,927 4 98.0 2 705 0 2.0

LLCB 0 0 0 0 0 0 0.0 0 0 0 0.0DP 0 0 0 0 0 0 0.0 0 0 0 0.0

110 43,974 5 108 43,269 5 98.4 2 705 0 1.6CC 0 0 0 0 0 0 0.00 0 0 0 0.0LCB 2 212 0 2 212 0 100.0 0 0 0 0.0

LLCB 0 0 0 0 0 0 0.00 0 0 0 0.0DP 8 2,737 0 8 2,737 0 100.0 0 0 0 0.0

10 2,950 0 10 2,950 0 100.0 0 0 0 0.0CC 0 0 0 0 0 0 0.00 0 0 0 0.0LCB 0 0 0 0 0 0 0.00 0 0 0 0.0

LLCB 0 0 0 0 0 0 0.00 0 0 0 0.0DP 4 2,088 0 4 2,088 0 100.0 0 0 0 0.0

4 2,088 0 4 2,088 0 100.0 0 0 0 0.0CC 0 0 0 0 0 0 0.00 0 0 0 0.0LCB 0 0 0 0 0 0 0.00 0 0 0 0.0

LLCB 19 53,542 6 19 53,542 6 0.00 0 0 0 0.0DP 0 0 0 0 0 0 0.00 0 0 0 0.0

19 53,542 6 19 53,542 6 100.0 0 0 0 0.0CC 0 0 0 0 0 0 0.00 0 0 0 0.0LCB 0 0 0 0 0 0 0.00 0 0 0 0.0

LLCB 9 31,036 3 9 31,036 3 0.00 0 0 0 0.0DP 0 0 0 0 0 0 0.00 0 0 0 0.0

9 31,036 3 9 31,036 3 100.0 0 0 0 0.0CC 0 0 0 0 0 0 0.00 0 0 0 0.0LCB 11 36,861 4 11 36,861 4 100.0 0 0 0 0.0

LLCB 0 0 0 0 0 0 0.00 0 0 0 0.0DP 0 0 0 0 0 0 0.00 0 0 0 0.0

11 36,861 4 11 36,861 4 100.0 0 0 0 0.0CC 15 3,026 0 15 3,026 0 100.0 0 0 0 0.0LCB 0 0 0 0 0 0 0.00 0 0 0 0.0

LLCB 0 0 0 0 0 0 0.00 0 0 0 0.0DP 0 0 0 0 0 0 0.00 0 0 0 0.0

15 3,026 0 15 3,026 0 100.0 0 0 0 0.01,131 385,878 43 1,109 360,899 40 93.5 22 24,979 3 6.5

B. FY2006Agriculture

Subtotal

Subtotal

2,006A. Cumulative FY2006-FY2009

Contracts funded by Government

Total (A)

Subtotal2,008

Subtotal

Fisheries

SubtotalIrrigation

Subtotal

Contract Value Contracts funded by ADBFiscal Year Contract

Type

Subtotal

2,009

Housing

Subtotal

RWSS

Subtotal

Fiduciary

SubtotalHealth

Subtotal

Total (B)

Roads & bridges

SubtotalPower

Subtotal

74 Appendix 12

No. Rp million $ million No. Rp million $ million % No. Rp million $ million %

CC 143 10,578 1 143 10,578 1 100.0 0 0 0 0.0LCB 68 39,403 4 64 36,656 4 93.0 4 2,747 0 7.0

LLCB 4 1,080 0 4 1,080 0 100.0 0 0 0 0.0DP 152 5,514 1 152 5,514 1 100.0 0 0 0 0.0

367 56,575 6 363 53,828 6 95.1 4 2,747 0 4.9CC 1,094 35,507 4 1,094 35,507 4 100.0 0 0 0 0.0LCB 4 27,881 3 4 27,881 3 100.0 0 0 0 0.0

LLCB 3 1,183 0 3 1,183 0 100.0 0 0 0 0.0DP 12 3,924 0 12 3,924 0 100.0 0 0 0 0.0

1,113 68,495 8 1,113 68,495 8 100.0 0 0 0 0.0CC 421 61,206 7 421 61,206 7 100.0 0 0 0 0.0LCB 46 45,922 5 46 45,922 5 100.0 0 0 0 0.0

LLCB 0 0 0 0 0 0 0.0 0 0 0 0.0DP 3 87 0 3 87 0 100.0 0 0 0 0.0

470 107,215 12 470 107,215 12 100.0 0 0 0 0.0CC 227 23,472 3 227 23,472 3 100.0 0 0 0 0.0LCB 84 85,718 10 84 85,718 10 100.0 0 0 0 0.0

LLCB 1 229 0 1 229 0 100.0 0 0 0 0.0DP 1 68 0 0 0 0 0.00 1 68 0 100.0

313 109,486 12 312 109,418 12 99.9 1 68 0 0.0CC 0 0 0 0 0 0 0.00 0 0 0 0.0LCB 0 0 0 0 0 0 0.00 0 0 0 0.0

LLCB 0 0 0 0 0 0 0.00 0 0 0 0.0DP 1 16 0 1 16 0 100.0 0 0 0 0.0

1 16 0 1 16 0 100.0 0 0 0 0.0CC 0 0 0 0 0 0 0.00 0 0 0 0.0LCB 13 29,177 3 10 22,568 3 77.4 3 6,608 1 22.6

LLCB 1 142 0 1 142 0 100.0 0 0 0 0.0DP 2 2,159 0 2 2,159 0 100.0 0 0 0 0.0

16 31,477 3 13 24,869 3 79.0 3 6,608 1 21.0CC 108 27,312 3 108 27,312 3 100.0 0 0 0 0.0LCB 0 0 0 0 0 0 0.00 0 0 0 0.0

LLCB 37 106,133 12 33 94,860 11 89.4 4 11,273 1 10.6DP 0 0 0 0 0 0 0.00 0 0 0 0.0

145 133,445 15 141 122,172 14 91.6 4 11,273 1 8.4CC 0 0 0 0 0 0 0.0% 0 0 0 0.0LCB 6 135,795 15 6 135,795 15 100.0 0 0 0 0.0

LLCB 0 0 0 0 0 0 0.0% 0 0 0 0.0DP 0 0 0 0 0 0 0.0% 0 0 0 0.0

6 135,795 15 6 135,795 15 100.0 0 0 0 0.0CC 0 0 0 0 0 0 0.0% 0 0 0 0.0LCB 8 31,143 3 8 31,143 3 100.0 0 0 0 0.0

LLCB 0 0 0 0 0 0 0.0% 0 0 0 0.0DP 0 0 0 0 0 0 0.0% 0 0 0 0.0

8 31,143 3 8 31,143 3 100.0 0 0 0 0.0CC 11 1,432 0 11 1,432 0 100.0 0 0 0 0.0LCB 0 0 0 0 0 0 0.0% 0 0 0 0.0

LLCB 0 0 0 0 0 0 0.0% 0 0 0 0.0DP 0 0 0 0 0 0 0.0% 0 0 0 0.0

11 1,432 0 11 1,432 0 100.0 0 0 0 0.02,450 675,081 75 2,438 654,385 73 96.9 12 20,696 2 3.1

D - FY2008CC 194 18,619 2 194 18,619 2 100.0 0 0 0 0.0LCB 37 24,052 3 32 23,189 3 96.4 5 863 0 3.6

LLCB 80 8,034 1 80 8,034 1 100.0 0 0 0 0.0DP 89 2,052 0 89 2,052 0 100.0 0 0 0 0.0

400 52,757 6 395 51,894 6 98.4 5 863 0 1.6CC 300 39,502 4 300 39,502 4 100.0 0 0 0 0.0LCB 0 0 0 0 0 0 0.00 0 0 0 0.0

LLCB 0 0 0 0 0 0 0.00 0 0 0 0.0DP 34 9,683 1 34 9,683 1 100.0 0 0 0 0.0

334 49,184 5 334 49,184 5 100.0 0 0 0 0.0CC 240 23,543 3 240 23,543 3 100.0 0 0 0 0.0LCB 31 20,027 2 31 20,027 2 100.0 0 0 0 0.0

LLCB 1 70 0 1 70 0 100.0 0 0 0 0.0DP 7 1,451 0 7 1,451 0 100.0 0 0 0 0.0

279 45,090 5 279 45,090 5 100.0 0 0 0 0.0CC 164 18,417 2 164 18,417 2 100.0 0 0 0 0.0LCB 17 11,397 1 17 11,397 1 100.0 0 0 0 0.0

LLCB 0 0 0 0 0 0 0.0 0 0 0 0.0DP 0 0 0 0 0 0 0.0 0 0 0 0.0

181 29,815 3 181 29,815 3 100.0 0 0 0 0.0

Contracts funded by ADB Contracts funded by GovernmentFiscal Year Contract Type

Contract Value

Agriculture

SubtotalEducation

Subtotal

C. FY2007

Fiduciary

SubtotalHealth

Subtotal

Fisheries

SubtotalIrrigation

Subtotal

Total ©

Power

SubtotalRWSS

Subtotal

Housing

SubtotalRoads & bridges

Subtotal

Fisheries

SubtotalIrrigation

Subtotal

Agriculture

SubtotalEducation

Subtotal

Appendix 12 75

No. Rp million $ million No. Rp million $ million % No. Rp million $ million %CC 0 0 0 0 0 0 0.0 0 0 0 0.0LCB 9 9,860 1 7 6,605 1 67.0 2 3,255 0 33.0

LLCB 18 22,510 3 18 22,510 3 100.0 0 0 0 0.0DP 6 1,525 0 5 1,007 0 66.0 1 518 0 34.0

33 33,894 4 30 30,122 3 88.9 3 3,773 0 11.1CC 239 28,222 3 239 28,222 3 100.0 0 0 0 0.0LCB 0 0 0 0 0 0 0.0 0 0 0 0.0

LLCB 21 58,309 6 21 58,309 6 100.0 0 0 0 0.0DP 1 45 0 1 45 0 100.0 0 0 0 0.0

261 86,576 10 261 86,576 10 100.0 0 0 0 0.0CC 0 0 0 0 0 0 0.0 0 0 0 0.0LCB 5 103,049 11 5 103,049 11 100.0 0 0 0 0.0

LLCB 0 0 0 0 0 0 0.0 0 0 0 0.0DP 0 0 0 0 0 0 0.0 0 0 0 0.0

5 103,049 11 5 103,049 11 100.0 0 0 0 0.0CC 0 0 0 0 0 0 0.0 0 0 0 0.0LCB 2 11,008 1 2 11,008 1 100.0 0 0 0 0.0

LLCB 0 0 0 0 0 0 0.0 0 0 0 0.0DP 1 486 0 0 0 0 0.0 1 486 0 100.0

3 11,495 1 2 11,008 1 95.8 1 486 0 4.21,496 411,861 46 1,487 406,738 45 98.8 9 5,122 1 1.2

E. FY2009CC 16 2,589 0 16 2,589 0 100.0 0 0 0 0.0LCB 0 0 0 0 0 0 0.00 0 0 0 0.0

LLCB 0 0 0 0 0 0 0.00 0 0 0 0.0DP 7 1,690 0 7 1,690 0 100.0 0 0 0 0.0

23 4,279 0 23 4,279 0 100.0 0 0 0 0.023 4,279 0 23 4,279 0 100.0 0 0 0 0.0

5,100 1,477,099 164 5,057 1,426,302 158 43 50,797 6Summary CC 3,924 376,139 42 3,924 376,139 42 1,600 0 0 0 0

LCB 448 747,740 83 413 709,582 79 1,685 35 38,158 4 115LLCB 194 282,268 31 190 270,995 30 889 4 11,273 1 11

DP 534 70,952 8 530 69,586 8 1,420 4 1,366 0 280Total 5,100 1,477,099 164 5,057 1,426,302 158 2,724 43 50,797 6 76

Fiscal Year Contract Type

Contract Value Contracts Funded by ADB Contracts funded by Government

Roads & bridges

Subtotal

Power

Total (B+C+D+E)

Education

SubtotalTotal (E)

Health

SubtotalHousing

Total (D)

Subtotal

Subtotal

ADB = Asian Development Bank, CC = community contract, DP = direct purchase, LCB = local competitive bidding, LLCB = limited local competitive bidding, Rp = Rupiah, RWSS = rural water supply and sanitation Exchange rate $1 = Rp9,000 Source = Asian Development Bank

76 Appendix 12

Table A12.2: Off-Budget Housing Construction Contracts Administered by ADB

Partner Location of Works Scope of Work Contract

Modality Contract Valuea

Utilization Balance

  ($) ($) ($) CORDAID Aceh Utara Construction of

380 houses Private 4,558,350.00 4,466,387.45 91,962.55

DWHH Simeulue, Pidie Construction of 620 houses

Private, community

6,398,248.00 6,389,973.81 8,274.19

HELP Nias Construction of 450 houses

Community 5,778,502.00 5,778,502.00 0.00

Muslim Aid Pidie, Aceh Utara, and Lhokseumawe

Construction of 686 houses

Private 5,752,421.00 5,752,421.00 0.00

UN-UABITAT 1 Nias Construction of 486 houses

Community 4,705,882.00 4,701,415.00 4,467.00

UN-UABITAT 2 Simeulue Construction of 347 houses

Community 4,874,443.00 4,874,382.83 60.17

UN-UABITAT 3 Simeulue Construction of 112 houses

Community 1,573,307.00 1,573,245.64 61.36

UN-UABITAT 4 Aceh Retrofitting sanitation facilities in 682 houses

Private 1,998,220.00 1,998,220.00 0.00

IOM Seunudon Water supply Private 807,186.00 807,186.00 0.00

IOM Labuy Infrastructure Private 669,664.00 669,664.00 0.00

      Total 37,116,223.00 37,011,397.73 104,825.27

a Total of several contracts as ADB specified that cost of each off-budget contract could not exceed $5,000,000. CORDAID = Catholic Organization for Relief and Development Aid, DWHH = Deutsche Welthungerhilfe, HELP = Hilfe Zur Selbsthilfe e.V, IOM = International Organization for Migration, UN-HABITAT = United Nations Human Settlements Programme Source: Asian Development Bank

Appendix 13 77

COMPLEMENTARY ACTIVITIES

A. Japan Fund for Poverty Reduction Projects

1. Four tsunami-related projects financed by the Japan Fund for Poverty Reduction (JFPR) amounting to $8 million were implemented in conjunction with the Earthquake and Tsunami Emergency Support Project.1 (footnote 5). These grant projects were designed to (i) improve livelihoods, (ii) rehabilitate natural resources, (iii) provide earthquake-resistant housing, and (iv) restore microenterprises and microfinance. The first two—Seismically Upgraded Housing in Nanggroe Aceh Darussalam and North Sumatra (SUHA) and Assistance for Restoration of Microenterprise and Microfinance in Aceh (ARMMA)—were completed in June and December 2009. 2 The implementation completion memoranda on these projects were circulated in February and May 2010. The projects were approved in late 2005, but the commencement of both was delayed because of institutional changes that were required after approval, particularly in implementing agencies. Several other factors, including delay in finalizing design and change in corporate priorities, delayed implementation by about 2 years, resulting in full benefits not being achieved. The implementation completion memoranda rate the former partly satisfactory and the latter satisfactory.

2. Under the SUHA project, 15 prototypes and 160 houses were constructed, against 34 prototypes and 300 houses with improved design intended at approval in 2005, because of rising costs. The key objective of the project was to demonstrate appropriate technology for replacing destroyed housing stock with affordable and seismically enhanced structures, and to lay the groundwork for a sustainable system of promotion of such housing through banks and microfinance institutions under credit lines for promoting earthquake-resistant housing to a wider clientele. The delay in the completion of the SUHA project beyond the expiry of the Agency for Rehabilitation and Reconstruction (BRR) mandate in April 2009 made the project’s purpose for using them as prototype and demonstration houses for seismically resistant house construction under the Aceh and Nias reconstruction program less relevant.

3. The ARMMA project helped expand microfinance services in Aceh by expanding the outreach of microfinance services to vulnerable people and low-income households in Aceh. The project developed microfinance pilot programs especially for households and microenterprises affected by the tsunami. It helped disburse nearly $1 million to 2,000 beneficiaries. The piloting approach allowed the introduction of much-needed financial products in an efficient manner. The adoption by banks and province-wide expansion of the products further illustrate the efficacy of this approach.

1 ADB. 2005. Report and Recommendation of the President to the Board of Directors on Proposed Grants to the

Republic of Indonesia for the Earthquake and Tsunami Emergency Support Project and Contribution to the Multidonor Trust Fund. Manila (The initial Asian Tsunami Fund grant of $290 million was approved on 7 April 2005. On 30 October 2006, the Board approved an increase of $1 million, corresponding to the Government of Luxembourg’s contribution to irrigation projects on Nias Island. R228-06 dated 17 October 2006).

2 ADB. 2005. Proposed Grant Assistance to the Republic of Indonesia for Seismically Upgraded Housing in Nanggroe Aceh Darussalam and North Sumatera. Manila ($2 million, approved on 6 September); ADB. 2005. Proposed Grant Assistance to the Republic of Indonesia for the Restoration of Microenterprise and Microfinance in Aceh Manila ($2 million, approved on 28 November).

78 Appendix 13

4. The scope of the livelihood and natural resource projects has been expanded and the completion date of these two projects extended to June 2011.3 Considerable progress has been made in the areas of community empowerment, sustainable livelihood development, coastal resource management, and the promotion of cooperation among nongovernment organizations (NGOs) engaged in coastal fishing. The establishment of livelihood support centers under the fisheries component of the project has been instrumental in this regard.

B. Multi-Donor Fund

5. To complement its support to Indonesia for mitigating the tsunami and earthquake disasters, the Asian Development Bank (ADB) joined the Multi-Donor Fund (MDF) soon after it was formally established at the request of the government in May 2005 and participates regularly in its activities and in its steering committee and technical review meetings. ADB’s contribution of $10 million entitled it to be a member of the steering committee guiding its activities. The World Bank has contributed $25 million to the MDF and has acted as an MDF partner agency on several projects.4 The closing date of the MDF has been extended from 30 June 2010 to 31 December 2012. The purpose of the extension was to ensure a smooth transition in management of its program from the BRR to the National Development Planning Agency (BAPPENAS) and other agencies of the central, provincial, and local governments, and to allow for the completion of several essential projects that were running behind schedule. The extension gives the MDF the time required to utilize the remaining funds on important reconstruction projects.

6. As of 30 September 2010, the MDF had received $677 million in pledges from 15 agencies and $620 million in payments. A total of $644 million had been allocated to 23 projects and a further $1.8 million committed to 2 projects. Another $32.7 million had been allocated to administrative expenses ($17.3 million) and appraisal, supervision, and monitoring costs ($15.4 million). The MDF has disbursed $500 million (78% of allocated funds) to the projects under implementation. All remaining project funds will be allocated soon to enable the spending of associated funds by the extended closing date of 31 December 2012.

C. Development Partner Coordination

7. MDF technical review and steering committee meetings provided the institutionalized framework for coordination among aid agencies. Up to the end of its mandate, the BRR organized regular coordination forums for Aceh and Nias to apprise development partners of progress in the implementation of reconstruction and to outline major policy initiatives, approaches, and strategies. BAPPENAS took over this role for aid agency coordination nationally, while the Aceh Sustainable Reconstruction Agency and the Nias Sustainable Reconstruction Agency took over the role provincially.

8. ADB partnered with NGOs and the United Nations Human Settlements Programme in channeling financial assistance to housing subprojects and to small enterprises and

3 ADB. 2005. Proposed Grant Assistance to the Republic of Indonesia for the Sustainable Livelihood Development for

Coastal Communities in the Special Province of Mangrove Aceh Darussalam Project. Manila ($2.5 million, approved on 6 September); ADB. 2005. Proposed Grant Assistance to the Republic of Indonesia for the Rehabilitation of Coral Reef and Mangrove Resources in the Special Province of Nanggroe Aceh Darussalam Project. Manila ($1.5 million, approved on 6 September)

4 The Multi-Donor Trust Fund changed its name to the Multi-Donor Fund in 2007. Although the MDF and the government invited ADB to be a partner agency, ADB declined because of staffing constraints.

Appendix 13 79

microenterprises. ADB coordinated project support for community-based water supply and sanitation with assistance provided by the governments of Canada, the Netherlands, and the United Kingdom under a complementary project. 5 Project-financed spatial planning for subdistricts and villages now serve as broad guidelines for local development supported by other aid agencies and NGOs. Under the project, ADB and the MDF worked working together to plan and design infrastructure projects along Aceh’s east coast. Some of these projects were financed and implemented under the MDF’s infrastructure reconstruction financing facility.

9. In microfinance, ADB forged strategic alliances with the BRR’s Aceh Microfinance Program and other international and national agencies to discuss joint projects and exchange information on their various microfinance development programs. In fisheries, ADB coordinated aquaculture assistance and shared lessons with other aid agencies, NGOs, and government agencies. This will help ensure the sustainability of project-supported fishery activities. The information system for the management of Aceh’s forest resources—one of the last initiatives under the spatial planning and environmental management component—was designed in consultation with the MDF and other stakeholders.

5 The complementary grants comprised (i) $16.5 million from the governments of Canada, the Netherlands and the

United Kingdom for the Community Water Services and Health Project—ADB. 2005. Report and Recommendation of the President to the Board of Directors on Proposed Loans and Emergency Assistance Grant to the Republic of Indonesia for the Community Water Services and Health Project. Manila (Grant 0003-INO) and (ii) $3.5 million from the Government of the Netherlands for strengthening fiduciary governance.

80 Appendix 14

IMPACTS AND ASSESSMENT

A. Project Impacts

1. The Earthquake and Tsunami Emergency Support Project, as completed, supported the government’s plan for post-disaster economic revival of Aceh and Nias and the overarching goal of poverty reduction. Of the 12 components, 7 are rated highly relevant: agriculture, fisheries, education, housing, irrigation, power, and fiduciary governance. Four components—health, micro and small enterprises (MSE), roads and bridges, and special planning and environmental management—are rated relevant, while the rural water supply and sanitation (RWSS) component is rated less relevant. The RWSS component became a general rural water supply project rather than emergency support for recovery or rehabilitation.

2. The agriculture and fisheries components supported the rehabilitation and restoration of agricultural and fishery production and livelihoods by adopting improved practices and service facilities. The MSE component helped the most vulnerable people and low-income households to restore and expand their viable economic activities through responsive, sustainable, and expansive financial services. However, the nature of the intervention under the MSE component, comprising the Microfinance Innovation Fund and capacity building in financing institutions in addition to livelihood grants, raises the issue of whether they were all appropriate in the context of the emergency nature of the project. Besides rehabilitating and reconstructing damaged schools, the education component made a contribution to the schools’ meeting the national standards by providing information and communication technology equipment and facilities. The health component assisted in extending and maintaining access to essential health services relevant to government policy, including realizing the Millennium Development Goals. The RWSS component aimed to provide water supply and sanitation facilities to communities, but its contribution to reconstructing or rehabilitating villages and communities affected by the earthquake and tsunami became marginal. The irrigation component supported the economic revival of Aceh and Nias by restoring and improving livelihoods in rural communities. The housing component was highly relevant at design and at completion, providing housing to those rendered homeless by the earthquake and tsunami. The roads and bridges component and the power component were consistent with the rehabilitation and reconstruction aims of the national and local governments.

3. During the joint needs assessment, restoration activities were generally assigned to each aid agency, and there could be some overlap. ADB assistance was formulated in just 2 months and was indicative only. Project interventions were adjusted after the government finalized what would be provided by each aid agency. The government also urged all funders to follow a build-back-better policy, which increased costs for the infrastructure works as compared with appraisal and substantially adjusted scope. This required the reallocation of funds among component and categories, which took time and incurred additional consulting costs. The revised outputs resulting from the adjustments were mostly achieved and contributed to the restoration of economic activities and livelihoods.

B. Environmental Aspects

4. The overall environmental impact of the project is positive. The project’s environmental classification at appraisal was category B, and this classification remained appropriate throughout implementation. Impact on the environment was one of the screening criteria used to assess priority projects for implementation. Most activities did not harm the environment or

Appendix 14 81

communities. Each individual project, both on and off budget, was preceded by a rapid environmental assessment or an initial environmental examination (IEE) to show adherence to ADB and government environmental assessment requirements. 1 The rapid environmental assessments and IEEs were reviewed by the Earthquake and Tsunami Emergency Support Project management office (EMO), particularly for large projects. No funding was provided to any subproject that did not meet IEE criteria. Most of the funded works were small, and any negative impact from immediate construction activities was both minor and temporary. The use of the technologies and infrastructure the project provided has had a net positive environmental impact because, when properly used, they are less environmentally damaging.

5. Project experience has shown that, even in post-tsunami Aceh and Nias, environmental assessment can be an effective tool for integrating environmental considerations into large infrastructure reconstruction projects, and that it is possible to meet both national and development partner assessment requirements without causing undue delays. However, project development and environmental assessment processes need to have a degree of flexibility to operate efficiently. The development process utilized by the project arguably resulted in a heavy processing and documentation burden at the subproject level, with the component IAs being required to develop subproject appraisal reports, subproject preparation reports, and social and environmental safeguard reports for each subproject. It likely would have been more efficient and effective to have conducted component IEEs covering key aspects such as siting, construction materials, water supply, and sanitation. In addition, ADB could have shown more flexibility in terms of recategorizing some very low-impact category B subprojects as category C. Although technically possible, it was felt that the process would be too time- and resource-consuming to be practical.

6. The experience of reconstruction and rehabilitation has highlighted that the provision of sustainable building materials is a major challenge in large-scale disaster reconstruction and requires additional attention. Challenges with sustainable household and institutional sanitation have highlighted that new and complex issues such as environmental protection and improvements in hygiene take time, and there is a danger that introducing innovations may fail if the benefits coming from the changes have not been clearly enough explained to and socialized for beneficiaries. There are many cultural traditions and habits that need to be recognized and respected to overcome initial resistance. Finally, large-scale disasters provide an opportunity to conduct reconstruction spatial planning and risk analysis to ensure that communities are reestablished, if required, in lower-risk locations. The window of opportunity is limited, however, and, if the opportunity is not seized, surviving beneficiaries and government and emergency agencies may proceed with reconstruction on an ad hoc basis, which ultimately can place reestablished communities at considerable risk from natural hazards such as flooding and landslides.

C. Social Dimensions

7. The EMO reviewed 198 subprojects for social safeguards. Almost half of them were assessed to have no social safeguard impacts and were given a C rating. Another 80 subprojects had minor land acquisition or involuntary resettlement impacts and were given a B rating. A roads and bridges subproject had significant land acquisition and involuntary resettlement and was given an A rating. More than 50 hectares of land and various structures owned or used by 2,260 households were affected by the implementation of the subprojects 1 In total, 165 rapid environmental assessments and 164 IEEs were produced, covering 263 and 247 subprojects in

10 components.

82 Appendix 14

funded under project. All land acquisition issues have been substantially resolved, as confirmed through external monitoring.

8. Support for the establishment of a grievance facilitation unit in the BRR and complaint handling has been a significant aspect of the project undertaken by the EMO, resolving 137 complaints. The Office of the Special Project Facilitator provided support for training project implementers and NGO partners in handling complaints and organized a series of workshops and exhibits to share experiences in handling complaints in the project with other organizations involved in reconstructing Aceh and Nias. In November 2009, the Office of the Special Project Facilitator launched a publication on the project’s experience in handling complaints to enable sharing them with a wider audience.2

2 ADB. 2009. Complaint Handling in the Rehabilitation of Aceh and Nias. Manila

83 Appendix 15

SUMMARY ASSESSMENT OF COMPONENT PERFORMANCE Project Factor Assessment Design (quality of framework or design logic)

The design of the components was generally satisfactory. Only power was rated highly satisfactory, due to its integration with the overall reconstruction program and full involvement of the national electricity authority. Conversely, health did not adequately integrate with or involve local government authorities. Some of the subcomponent designs under the spatial planning and environmental management (SPEM) component were overoptimistic and did not reflect realities. Only two components, agriculture and fisheries, prepared component-specific design and monitoring frameworks,

In-project planning process.

Components found the in-project planning process, involving concept notes, subproject appraisal reports (SPARs), subproject preparation reports (SPPRs), and initial environmental examinations (IEEs), to be complex and time-consuming but generally sound. Implementing agencies usually had little capacity to contribute to detailed planning, so much of the work was undertaken by the component consultants. The irrigation and the roads project implementation units (PIUs) made changes to design without consulting with component consultants, to the detriment of some subprojects.

Adequacy of budget and budget processes

Budgets were satisfactory and sufficient to cover the scope of work and the variations that were granted. The housing component's budget proved inadequate to meet initial targets in the face of rapid price escalation. However, on-budget processes were found to be cumbersome despite the flexibility provided by post-facto approval by ADB. Off-budget processes allowed more rapid approval and implementation but reduced the involvement of sector institutions. Consultancy needs were severely under-budgeted by most components. Needed variations in scope were generally approved on a reasonably timely basis, though some consultant contract variations were protracted and caused implementation delays.

Adequacy of material and human resources

The planned use of consultant resources often proved inadequate given the weakness of the line agencies and PIUs, resulting from the years of conflict and the tsunami. ADB was flexible in approving additional consulting resources where required. Recruitment and variations were generally conducted efficiently, though some components, such as education, suffered from delayed mobilization. In most cases apart from housing, budgetary resources were adequate for the needs of the component programs, and in one or two cases excessive, such as micro and small enterprises (MSEs). The expanded scope of the roads and bridges component was funded by reallocating funds from other components, while SPEM expanded considerably from its planned level late in the project period, delaying project completion. The annual change of PIU staff was seen as harmful by almost all components because of lost institutional memory and experience. Material resources were generally adequate. However, limited availability and competition for materials led to price increases, particularly in 2007–2008, causing cost overruns or reduced targets in some components such as housing. Both the powercomponent—due to integration with the national electric authority (PLN)—and the rural water supply and sanitation (RWSS) component were deemed highly satisfactory with respect to resource availability.

Innovation in design and implementation

While the project demonstrated substantial innovation in its funding, management, safeguards, and procurement systems overall, little innovation was demonstrated by individual components. This was understandable given the urgency required and the BRR strategy of building back better. In some cases, innovation was tried and rejected by traditional engineers in the PIU (e.g., in school construction methods). However,earthquake-resistant housing was a positive innovation. In irrigation, reinforced concrete canal design, though innovative in Aceh, was seen as having several disadvantagescompared with more traditional masonry. The fisheries component introduced a number of innovations rated highly satisfactory. Substantial innovation was shown in the development of community contracts up to a value of $30,000—higher than the $5,000 indicated in Indonesian guidelines. These contracts in the agriculture, irrigation, fisheries, and RWSS components were almost universally successful or highly successful. Innovations under the fiduciary governance component had great benefits in terms of speed of fund release and control of corruption, both in the project and in other projects funded by the government and aid agencies.

84 Appendix 15

Project Factor Assessment Implementation performance

Implementation performance was generally satisfactory, despite often weak and frequently changing PIUs. The irrigation component and roads and bridges component both experienced problems of unilateral change of design by PIUs, since consultants’role was advisory and not task oriented. This raised a number of issues on individual subprojects. Agriculture implementation was highly integrated with departmental activities and received strong support. However, in fisheries, the government agency was weak and unable to support implementation. Several components experienced implementation delays for a variety of reasons. These components were fisheries, education, health, housing, power, and RWSS. However, in comparison to most ADB grant projects, implementation performance was still good.

Tendering procurement and disbursement performance

Procurement was rated partly satisfactory by most components involving construction:fisheries, health, housing, irrigation, power, roads and bridges, and RWSS. Despite the poor ratings, performance was better than in most grant projects in Indonesia. On-budget procurement was lengthy and inflexible, though the BRR made major efforts to promote flexibility. ADB's introduction of post-facto approval processes was highly positive. The education component reported success with its block grant system, which promoted ownership by the school.

Land-acquisition processes

Most components either did not involve land acquisition or achieved required acquisitionwithout problems (e.g., for irrigation through community action plans with most beneficiaries donating their land). The small areas required for power pole erection were also donated. Only Ulee Lheue road required major resettlement and compensation, and the process generally went well.

Contractor performance Contractor performance under most components was satisfactory, though often with some problem contracts. For roads and irrigation, performance was classed as acceptable to poor due to (i) limited numbers of capable contractors bidding for projects in a range of sectors and projects, (ii) the involvement of ex-combatants, (iii) shortages and high costs of construction materials such as timber and cement, and (iv) shortagesof working capital. Community contracts were almost all successful and compared favorably with local competitive bidding contracts under the project.

Performance of preparation and implementation consultants

Consultants made major contributions to the design and implementation of allcomponents, often working under difficult circumstances, particularly in 2005 and 2006. With few exceptions, international consultant performance was at least satisfactory;when changes in the teams were necessary (e.g., in education) they were made expeditiously. In RWSS, initial consultant performance was impeded by an over-complex organizational structure and unclear and partly overlapping responsibilities. Of the SPEM subcomponents, only one package on village planning was rated satisfactory, with the remainder partly satisfactory.

Performance of national consultants

In the power component, local consultant performance was rated highly satisfactory, mainly because of consultants’ close links with the sector institution. In RWSS, poor initial performance improved with a change of management in 2008. SPEM local consultant performance was satisfactory except in one package in which they found the required advisory role difficult. The recruitment by ADB of Bina Swadaya to provide support to agriculture, fisheries, and irrigation sector community development did not prove effective.

Recruitment of consultants; processing of consultant contract variations

ADB undertook consultant recruitment for all components efficiently, with most teams mobilized by September 2005—a key factor supporting efficient and expeditious project implementation. Variations were numerous because of expanding consultancy needs. Delays in headquarters caused problems for some components, particularly fisheries, health, housing, and irrigation. Processing through the Extended Mission to Sumatra (EMS) was more timely.

Performance of implementing agencies, PIUs, EA, and national ministry

Problems were experienced in 2005 with implementation through national ministries (e.g., fisheries). The Ministry of Agriculture decentralized agriculture to Aceh in August 2005, effectively gaining a 6- to 9-month start in component implementation and enabling the project to assist directly in the critical first planting season after the tsunami in October and November 2005. The BRR took over the implementation of all components in 2006, and implementation generally improved.

Appendix 15 85

Project Factor Assessment However, the performance of the BRR's PIUs and subproject managers was highly

variable, with some excellent and some poor. Frequent changes in PIUs were not conducive to efficient implementation. The implementation of decisions without discussion with component advisors was a problem, particularly in roads and bridges and in irrigation. Implementing agency (IA) performance was also rated partly satisfactory by the fisheries, health, housing, RWSS, and SPEM packages relating to subdistrict planning.

Component management and support by ADB

ADB management and support were considered satisfactory by most components, with the shift to local management under the EMS considered highly positive by most, allowing close relations to be developed with the EA and IAs and rapid and effective decision making. ADB's performance was compared favorably with that of some other multilateral agencies by some beneficiaries. ADB was effective in allocating necessary resources, for example, providing follow-up technical assistance following the failure of SPEM on forestry information system management.

Beneficiary participation Time pressure meant there was little involvement of beneficiaries in the original design of the project. However, all components made strong efforts to maximize beneficiary participation in detailed design. It was particularly strong in village work by the agriculture, fisheries, housing, and irrigation components, where community participation made a major contribution to successful performance. However, some contractual problems were encountered, particularly with the documentation of community contracts. The education component involved strong participation by supported schools, particularly in the acquisition of teaching materials and information and communication technology equipment. Participatory village planning in the housing component was successful. However, planned participation in the community health program did not occur, with planning failing to include health center staff.

Ownership by beneficiaries and groups

Ownership by beneficiaries and community organizations was strong, notably in agriculture, fisheries, housing, irrigation, and RWSS. The involvement of civil society groups was noticeable in anticorruption efforts developed under the fiduciary governance component. Under MSE, the introduction of Grameen-type banking was partly successful and forged strong links with microfinance groups and poor women borrowers. Ownership by local governments of SPEM outputs was mixed, with some highly positive, but others requiring more effort to build ownership.

Ownership by implementing agencies

Both the roads and bridges component and the irrigation component report low ownership by the BRR due to its transient nature.

Ownership by other government organizations

The extent of ownership varied from high in agriculture, fisheries, health, MSE, RWSS,and village mapping to low in education, housing, irrigation, and the SPEM’s east and west coast infrastructure subcomponent.

Involvement of and relationships with nongovernment organizations (NGOs)

Strong interaction with NGOs was experienced in the health and housing components. The latter had interaction with many NGOs active in the sector, engaging several as IAs, and with CBOs operating in the communities. Input from NGOs was important in designing the distribution network under the power component. In the agriculture and fisheries components, the relationship between Bina Swadaya and the component teams was not good; it seemed to have been more successful in the irrigation component. Fisheries developed strong links to local community organizations, particularly the traditional fisheries groups known as panglima laot.

Ownership by private sector organizations

There was little linkage to the private sector except as individual or group beneficiaries (e.g., in the agriculture, fisheries, or irrigation component) or as contractors (all subprojects involving construction).

Linkage to and coordination with other project components

Linkages among the livelihood components agriculture, fisheries, irrigation, and microfinance were not successful. This had negative outcomes for irrigation, where clearing sand and tsunami debris from severely damaged west coast schemes could have been supported by agriculture. The power component had effective coordination with other components, particularly housing and roads and bridges. However, no direct linkage could be established between roads and bridges and housing due to BRR dictates and different geographic focuses.

86 Appendix 15

Project Factor Assessment Linkage to and coordination with other bilateral or multilateral projects reconstruction programs

Agriculture made substantial efforts to link to other aid agencies and share information. Coordination was strong in the aquaculture subsector but less so in capture fisheries. Fiduciary governance had implications for all projects implemented in Aceh, particularly through improved treasury performance and governance management. The power component coordinated closely with the west coast highway project funded by the United States Agency for International Development in relation to distribution line development. SPEM outputs have been strongly used by other agencies, particularly SPEM district planning outputs. To a lesser extent, SPEM outputs relating to forest planning have also been useful.

Linkage to and coordination with other government projects

As is common in Indonesia, there was little potential to establish links with other government projects. However, housing needed to and did coordinate with other housing projects, while roads and bridges were allocated sections of the east coast road as other agencies worked on intervening sections.

Compliance with national and local policies

Component compliance with government policy was in almost all cases satisfactory or highly satisfactory, with housing, power, and RWSS deemed to demonstrate full compliance. ADB placed strong emphasis on environmental and social safeguards, requiring the implementation of appropriate measures. In the environmental sector, the integration of ADB and local government policies was positive. By agreeing with ADB's wish to allow community contracts up to $30,000, the government showed flexibility when its own guidelines often limited value to around $5,000.

Degree to which component has contributed to policy development

While an emergency support project would not be expected to have substantial impact on policy, there have been some positive achievements. Agriculture contributed to a number of policy gains, notably improvement in the management of seed centers. The community mental health and nursing program has made a substantial contribution to a move towards managing mental health problems in the community. The model health center concept has potential to contribute to policy development to improve health-care services, while medical waste management should improve. The introduction of supervisory control and data acquisition technology has been accepted by the PLN and is being introduced in other regions to improve power management and monitoring.SPEM has made a significant contribution to spatial planning policy development in Aceh and North Sumatra.

Approach to social and community development

Social and community development was strongly supported by the agriculture, fisheries, irrigation, and RWSS components through community organization and contracting. The education component considered that the use of community block grant funding prescribed by the government significantly promoted community participation and washighly satisfactory. The anticorruption efforts under fiduciary governance involved efforts directed at village communities and their social fabric. The participation of communities was strong in the power component, ensuring that lines could be constructed along desired alignments.

Approach to gender and development

All components sought to include gender equity in their designs. The fiduciary component provided support to strengthen gender focal points in government agencies in collaboration with the United Nations Development Programme. Housing ensured equal land rights for men and women. Properties are registered in both names or in the names of female household heads. Under MSE, the Grameen banking system that was introduced has 100% female clients and has made great strides, particularly in North Sumatra. RWSS's gender strategy is classed as highly satisfactory.

Approach to environmental management and monitoring

A rehabilitation and reconstruction project would be expected to have minimal negative environmental impact, and this was the case. While, in recognition of ADB's environmental safeguards policies, most components were required to prepare IEEs, all were category B and thus not required to undertake environmental impact assessment. This was by design, as such assessments would have delayed implementation. In the fisheries component it had negative consequences by preventing the inclusion of a much-needed dredging component. However, fisheries environmental impact is classed as highly satisfactory, with a number of positive outcomes. RWSS reports a reduction of open defecation and rudimentary solid waste management making progress.

Appendix 15 87

Project Factor Assessment Governance (including anticorruption)

Most components reported minimal or zero corruption or governance issues. However, the roads and bridges, housing, and irrigation components faced issues in relation to ex-combatants gaining contracts for which they were unqualified or interfering with local competitive bidding contracts won by regular contractors. No case of coercion in relation to community contracts was reported. Fiduciary governance had a major focus on supporting anticorruption efforts, which was largely successful. No instance of corruption was reported by project components, which is a satisfactory achievement, particularly given ADB's post-facto approach to contract and works approval. Some contracts were declared ineligible for funding under the project due to poor tender procedures or, more commonly, lack of documentation. However, the total amount involved was relatively small, $5.3 million.

Complaints and complaint-handling and media issues

Complaint handling under the project was highly satisfactory, particularly in fisheries and housing. Most components developed complaint-handling systems that proved able to respond to most complaints from beneficiaries and others. Generally the number of complaints was limited, probably because of the transparent planning and implementation processes adopted by components, and perhaps also because of the post-tsunami environment, in which all stakeholders were keen to rebuild and thus took a positive approach to project investments. The housing component received a larger number of complaints, 700 in total, which were successfully resolved. Irrigation did not effectively disseminate information on the complaints process.

Internal monitoring & evaluation

Monitoring was allocated less-than-normal importance because of the project’s emergency nature. However, the housing component adopted a highly satisfactory monitoring system. Intensive monitoring of the roads and bridges component and the irrigation component was mainly by the consultants, as monitoring by PIUs was limited. The monitoring of activities and outputs under fiduciary governance and MSE components largely involving technical assistance was partly satisfactory.

External monitoring External monitoring was largely through a contract with Syiah Kuala University in Banda Aceh and focused on safeguards. The consultants performed well and provided useful information to the EMS and the components, relating particularly to resettlement and compensation. The EMS undertook environmental monitoring, as did provincial environmental protection agencies. The harmonization of environmental monitoring between the organizations was highly satisfactory.

Handover The handover of assets was highly satisfactory for the power component, but less so for some others, such as irrigation (unsatisfactory) and fisheries and housing (partly satisfactory). Several irrigation schemes on the west coast remain dysfunctional because of failure to clear tsunami debris. The fisheries component has had difficulty passing over management of fishery assets such as small ports to the fishers for lack of supporting government policies. The housing component experienced similar problems with handover, as did urban roads and water supplies, which local governments may not accept, partly because of their lack of involvement in implementation.

Source: Asian Development Bank.

88 Appendix 16

LESSONS FROM PROJECT IMPLEMENTATION

A. Needs Assessment

1. An important lesson from the Earthquake and Tsunami Emergency Support Project is that the task of responding to a disaster of the magnitude of the 2004 earthquake and tsunami in Aceh and the 2005 earthquake in Nias must be tempered with realistic expectations. While emergency relief works must be rapid, effective post-disaster infrastructure reconstruction requires careful assessment, planning, and preparation if the needs and priorities of reconstruction are to be properly addressed. This preparation must also take into account the demands placed on local resources in post-disaster circumstances by the reconstruction activities of other agencies. The time, effort, and costs involved in effective planning and preparation should not be underestimated.

2. Emergency response was limited only to livelihood grants for restoring microenterprises. Some components such as education and health aimed to facilitate medium- to long-term policy reforms by local government agencies, while support for microfinance funds emphasized the development of a sustainable financing mechanism for small and micro enterprises. This was partly for lack of clarity on whether such support was desirable in the context of post-disaster reconstruction supported provided by the project.

3. The joint government and multi-donor needs assessment of the physical damage and impact on livelihoods and infrastructure was an important and necessary exercise, similar to that used for assessing other recent disasters. However, such an exercise cannot be the final decision-maker on the scope of works for required reconstruction after a major disaster. Final decisions can be made only once detailed designs and actual costs are known. Instead, the assessment should be considered a framework for planning and overall financing exercise by the government and multiple aid agencies. The joint needs assessment should identify and address emergency program implementation problems such as the lack of government staff, regulations, or design standards for various physical works.

4. The project was implemented as part of the $7 billion reconstruction program supported by international agencies, governments, and nongovernment organizations (NGOs). In the context of such massive reconstruction efforts, supply constraints are bound to arise. Under the project, besides adopting a pragmatic and flexible approach, including involving NGOs in construction work, procurement activities were expanded to other provinces to the extent possible and necessary.

5. Better identification of donors’ preferences should be done during the needs assessment to reduce duplication of support and avoid reprogramming. The Asian Development Bank (ADB) ended up reallocating millions of dollars as the scope provided by various agencies became known. However, this may be difficult to achieve, as the government tends to ask all aid agencies for assistance to ensure there are no gaps, and each agency's program varies in the time it takes to finalize it.

B. Selective Intervention

6. Reconstruction support should be selective and follow a realistic time frame. In estimating schedules for such reconstruction efforts, the general tendency is to underestimate

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the time required. An unrealistic time frame requires adjustments and additional resources. Adequate allowance must be made for prevailing circumstances, particularly the logistics of materials supply and the availability and capability of human resources. These constraints notwithstanding, the post-disaster recovery and reconstruction in Aceh and Nias have been relatively fast and effective. There are few if any shortcuts that can be introduced in the planning and preparation phases of post-disaster infrastructure reconstruction projects. Sufficient time and resources must be assigned to this preparatory phase if normal requirements with respect to quality standards, social and environmental safeguards, and cost effectiveness are not to be sacrificed.

7. In determining the magnitude of disaster reconstruction support, taking into account damage and loss assessment and government capacities, ADB should not compete with others such as bilateral agencies or NGOs that can deliver early recovery support but, instead, select a few early recovery activities to demonstrate commitment. Support for development-oriented activities funded by the project such as strengthening finance institutions, mental health, and nursing should be avoided.

8. In any future disaster management support, ADB should remain selective and not cover too many sectors but focus, instead, on areas that are unlikely to receive support from other partners. Grant allocations among components should be indicative and not considered rigid, and they should be utilized flexibly to respond to emerging needs. ADB funding may be directed to sizable reconstruction projects, leaving smaller operations to be channeled through multi-donor funds where possible to minimize transaction costs. Partner agency roles in a multi-donor fund framework may be considered for the meaningful and effective utilization of ADB contributions.

9. Phasing reconstruction assistance may be considered. A clear distinction should be made between the planning needs of the initial emergency disaster relief response and those of the subsequent reconstruction phase. Where post-disaster reconstruction is on-budget through a new executing agency (EA) such as the BRR and working with implementing agencies (IAs) drawn from government line ministries and other agencies, the effectiveness of the response depends on the willingness and effective collaboration of government agencies.

10. Project design envisaged a phased approach. In the first phase, the principal focus was to be on rebuilding where complex spatial decisions would not be required and on supporting preparatory work. Subproject formulation and implementation were to be undertaken in the second phase. Such a sequenced approach, though desirable, was not possible for various reasons, including a lack of clarity regarding the focus of support and the tendency to demonstrate results on several fronts at the same time.

11. The project did not provide any quick emergency response except for a limited grant for immediate livelihood restoration channeled through an NGO. Because it took time to engage the NGO off-budget, this response was delayed. ADB’s microcredit programs through the Microfinance Innovation Fund ended up competing with several other aid agencies, with the result that substantial time, effort, and costs were lost in first attempting to make the programs work, and then in reallocating funds and having to design additional works. ADB should consider supporting microcredit only where there are no others to do so, when others fail to provide promised funds, or where a mechanism is already in place to deliver such programs.

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C. Institutional Arrangements

12. Proper institutional arrangements are essential. Central, effective coordination by one agency is essential. A strong, experienced leadership team should be entrusted with coordinating other government agencies and the aid community. This was done for the management of the massive reconstruction program. The newly formed BRR had limited capacity or funding to immediately take over the logistically complex task of overall coordination and management of the massive and diverse financial and material inputs from a wide range of national and international agencies seeking to contribute to the reconstruction program.

13. Experience in the initial stages of project implementation demonstrated that the degree to which the human and material resources of the local government agencies in the disaster-affected regions of Aceh and Nias were directly impacted by the earthquake and tsunami was significantly underestimated. The lack of ability of the central government ministries to take on the IA role became apparent over the course of 2005. Further, the availability of human and material resources to satisfy the requirements of those agencies had been overestimated. Government unwillingness to use retroactive financing of up to 30% of the grant amount because of need to provide documentation, which is difficult under disaster situation, highlights the institutional constraint.

14. The institutional arrangements envisaged at appraisal were flawed, as they involved a combination of rapid response by a central agency and conventional implementation through line ministries. The delayed establishment of EA’s project management office affected proper coordination and monitoring. ADB agreed to fund the engagement of a consulting team to help the EA in overall project management. When new agencies are to be established for disaster management, their institutional capabilities should be carefully assessed and the required improvements identified and supported from the beginning to ensure sustainability.

15. The business-as-usual approach taken by the line ministries initially tasked with forming PIUs for the various sectors of post-disaster infrastructure reconstruction eventually led to the BRR being delegated by the government to take over the role of IA from the various line ministries. This caused difficulties, however, as establishing dedicated PIUs and subsequent project preparation had to be started again with little improvement in approach or attitude. The personnel of the new PIUs were drawn largely from the corresponding line ministry organizations and were at times even more hesitant to deviate from business-as-usual when removed from their normal chain of command and familiar working environments.

16. The breadth and magnitude of ADB assistance was ambitious without an enabling institutional framework in place. Implementation was greatly affected by challenges inherent in preparing the BRR with a fixed-term mandate to coordinate and manage the project, particularly its relationship with the sectoral line agencies. Complex budgetary processes made timely implementation difficult, as budget approval took considerable time. The annual appointment and reappointment of PIUs was not helpful in overcoming the institutional weakness inherent in a new organization because of limited responsibility, lack of ownership and commitment, and the need to repeat the learning process each year. Post-procurement and disbursement review helped expedite implementation but could not be supported by adequate coordination or monitoring of required documentation. Post review may be adopted when the institutional framework is proven and has the required capability.

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D. Sustainability

17. On-budget implementation ensures sustainability. While on-budget activities were affected by the limited experience of the EA, the IAs and the PMUs, the off-budget engagement of NGO and other partners for housing construction was the first such involvement by ADB, which proved effective as they operated in remote and inaccessible areas. Sustainability, however, was a major issue. All partners faced difficulty meeting project preparation requirements on documentation and environmental and social safeguards and lacked familiarity with ADB procedures and guidelines. However, once initial unfamiliarity with project requirements was overcome, the performance of off-budget partners was positive and effective. It is a lesson for other post-disaster reconstruction situations.

18. This may be a limitation of the semi-turnkey contracting arrangement that required ADB approval at different stages. While some partners performed well, others had difficulties because of internal management and personnel issues. The unfamiliarity of off-budget partners with ADB procedures and guidelines delayed the procurement of materials and the execution of civil works subcontracts. If off-budget implementation is to be used, greater care should be exercised in identifying and engaging NGOs that, under full turn-key arrangements, will take full responsibility for contract supervision and administration on behalf of ADB. More importantly, the off-budget construction modality may be applied only if other options do not yield desired outcomes because of difficulties in sustaining such activities for lack of the required institutional framework.

19. Using existing government budget and implementation systems provided an immediate implementation mechanism with sufficient outreach to all tsunami- and earthquake-affected locations. Using government systems also helps build capacity and improve sustainability. However, some components found the off-budget modality more effective, particularly when dealing with communities. There is a trade-off between quicker delivery of project activities and building capacity for sustainability.

E. Flexibility and Decentralization

20. Flexibility in implementation is essential. Project implementation demonstrated that a flexible sector modality with no subproject ceilings and general selection criteria facilitates the design of need-based reconstruction projects through simplified documentation. The sector approach helps integrate the different components through shared goals, objectives, and outputs. On-budget disbursement provides an extensive and established outreach program and builds capacity for future reconstruction programs.

21. Decentralization is essential in effective disaster management. The EMS was essential in helping ADB with the delivery of the project support. Full decentralization of subproject approval and implementation supervision to the EMS proved highly effective and efficient. The EMS also advised the government on project-management and fund-utilization matters throughout implementation. By moving project supervision to the EMS, ADB demonstrated responsiveness to adapt it emerging needs, which is essential in disaster reconstruction.