MANILA, PHILIPPINES (11 April 2005) - The Asian Development Bank (ADB) has approved a USD 300 million grant - its biggest ever single grant - from its Asian Tsunami Fund [ PDF ] to help rehabilitate and reconstruct areas in Indonesia afflicted by the earthquake and tsunami disaster of December 2004.

Out of $300 million, a grant of USD 290 million will be provided for the Earthquake and Tsunami Emergency Support Project, which will help restore essential public services, rebuild infrastructure, and revive economic activity through livelihood support.

Indonesia, particularly the provinces of Aceh and North Sumatra, was the most devastated among the tsunami-affected countries, with at least 126,000 lives lost, about 94,000 people missing, and about 412,000 others internally displaced. The disaster has made around 20% of Aceh's population homeless today.

The damages and losses in the country, estimated at USD 4.7 billion by a joint assessment conducted by the Government and international donor community, including ADB, are the largest requirement among the affected regions in Asia.

"Apart from the grave tragedy and trauma, the disaster resulted in the complete destruction of most infrastructure along the coastlines, leading to a total collapse of public services, major loss of private property, and virtual loss of livelihood," says Shamshad Akhtar, Director General of ADB's Southeast Asia Department, which oversees its operations in Indonesia.

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

The project will adopt a two-phase approach, focusing first on providing support to less-affected regions and launching assessments in the most-affected regions. Phase two involves subproject implementation after the spatial planning and safeguard issues are resolved.

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

Based on the disaster management, rehabilitation, and reconstruction (DMRR) strategy for Aceh and North Sumatra, jointly prepared by the Government and the donor community, the following sectors will receive support under the project:

• Livelihood restoration, including the rehabilitation of the agriculture and fisheries sectors and the revival of micro and small enterprises (USD 87.3 million)
• Social services provision, including the reconstruction of health and educational facilities, as well as vocational training for affected people (USD 47.7 million)
• Community infrastructure, including the provision of water and sanitation facilities, rebuilding of irrigation infrastructure, and reconstruction of damaged housing stock (USD 127.4 million)
• Physical infrastructure, including rebuilding damaged roads and bridges, restoring power supply, and strengthening environmental management systems (USD 48.1 million)
• Fiduciary governance, including capacity building activities to ensure the effective delivery of assistance (USD 11 million).

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

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

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

The Government of Indonesia will contribute USD 28 million toward the project's total cost, estimated at USD 321.5 million equivalent.

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

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

The Asian Tsunami Trust Fund was set up by ADB in February with an initial contribution of USD 600 million to deliver prompt emergency grant funding to tsunami-affected countries. The fund takes ADB's total financial commitment on tsunami assistance to USD 775 million, which includes USD 175 million that can be redirected from ongoing projects and programs for the overall tsunami effort. It will be used to provide assistance to tsunami-affected countries including India, Indonesia, Maldives, Sri Lanka and Thailand.

The Asian Development Bank is dedicated to reducing poverty in the Asia and Pacific region through pro-poor sustainable economic growth, social development, and good governance. Established in 1966, it is owned by 63 members, with 45 from the region.

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