The Immediate Response

4.1. Rescue and Relief

In the first couple of days after the tsunami, little information was received by the outside world so initial rescue operations were relatively limited and slow. In this early stage, local people had to depend on their own resources to survive for some days before Indonesian government agencies responded. Soon after, when the outside world started to realise what had happened, international responses began to get underway. It is worth noting that during this first week, the Indonesian military—which has come under some criticism for their military operations in Aceh—provided crucial assistance in conducting rescue and relief operations and in helping to cope with the large number of dead.

By the beginning of the second week the numbers of domestic and international aid organisations arriving in Aceh increased significantly. Although there was reportedly some lack of coordination between these organisations, the fact that they were able to provide relief for the tsunami victims was much more important. In the third week, the number of international organisations arriving in Aceh continued to rise—around 250 domestic and international organisations sent workers to Aceh. Countless others provided other types of assistance (Sen and Steer, 2005; Indrawati, 2005). The media also played a very important role by attracting these domestic and international supports.

By mid-February 2005, the UN Office for the Coordination of Humanitarian Affairs (OCHA) recorded that total pledges and commitments from over thirty countries and various organisations had reached approximately US$800 million (OCHA, 2005). Around 2.3 million people were directly affected by the disaster so the aid contribution for rescue and relief activities per person was about US$350. The norm in previous international fundraising attempts in the face of natural disasters in developing countries has been a mere US$40 per person (Economist, 5 February 2005; Athukorala and Resosudarmo, 2005).

The Indonesian central government also responded quickly by announcing at the end of December 2004 that the government would release approximately US$5 million to support relief activities. The Government also announced that it would support operations in three phases: (1) emergency rescue and relief operations, (2) rehabilitation and reconstruction of basic socioeconomic infrastructure and restoration of law and order, and (3) reconstruction of the economy and government system. The first phase was completed by April 2005. The second phase has been in progress since April 2005 and was expected to last for around two years. The third phase will take around three to five more years (BRR and International Partners, 2005).⁶

It can be said that the relief efforts conducted by both domestic and international organisations provided great physical and financial assistance. It should also be noted, however, that local people were obliged to depend on their own resources during the first couple of days after the disaster. This fact shows the importance of establishing strong and resilient local communities.

4.2. Funding

The international focus on victims of the Aceh tsunami as well as the Nias earthquake continued well beyond the initial relief period. The Paris Club of creditor nations at its meeting in Paris on 12 January 2005 declared a moratorium on the foreign debt of the tsunami-hit countries. Some key players in the international aid community, including World Bank President James Wolfensohn, suggested that debt write-offs would be preferable to debt deferral. However this proposal was not agreed to on the grounds that that it might raise moral hazard issues: countries absolved of debt might be tempted to borrow excessively in the future in the expectation that they would eventually be bailed out if, for some reason, they had difficulties in meeting repayments. The IMF and World Bank officially endorsed the moratorium and the major international credit-rating agencies agreed that they would not regard deferral of debt service payments as a negative factor in their risk assessments and credit ratings. Subsequently, the IMF and the World Bank also announced considerable debt relief for the affected countries, particularly the Maldives, Sri Lanka, and Indonesia (Soesastro and Ace, 2005; Economist, 5 February 2005).

Members of the Consultative Group on Indonesia (CGI) at a meeting convened hurriedly on 19–20 January 2005 agreed to contribute US$1.7 billion in 2005 for the reconstruction of Aceh. Of this amount, US$1.2 billion was promised in the form of grants and the remaining US$0.5 billion was pledged as soft loans at zero or near- zero interest rates. Of the US$1.2 billion in grants, only US$0.2 billion was to be distributed through the Indonesian Government. The rest was to be distributed through non-governmental organisations (NGOs) (Soesastro and Ace, 2005).

In February 2005, the Asian Development Bank (ADB) set up a US$600 million Asian Tsunami Fund to provide grants for emergency technical assistance and reconstruction projects. Indonesia would receive half of the grant, divided into US$290 million for the Earthquake and Tsunami Emergency Support Project (ETESP) and US$10 million as the ADB’s contribution to the Multi Donor Fund (MDF) for Aceh-Nias. The ETESP is intended to support disaster management, reconstruction, and rehabilitation in affected areas of Aceh and North Sumatra. The sectoral targets of the grant include agriculture, fisheries, micro and small enterprises, health, education, water supply, irrigation, housing, power, roads, and spatial planning (ADB, 2006).

Commitments from various countries, organizations, and private individuals to support the reconstruction effort were considered generous. For example, Australia agreed to provide financial support amounting to about A$1 billion—A$500 million was expected to be in the form of grants and A$500 million in soft loans—over the period 2005–2010. According to records maintained by the BRR, 78 countries, 30 organisations, and many individual donors pledged support (both grants and soft loans) of around US$6.1 billion in total by November 2005. The total amount given through direct private contributions was quite large; according to some estimates, this amounted to US$2.5 billion out of the total donor pledges. In some cases, such as in the United Kingdom, United States, and Italy, private contributions exceeded government contributions by a wide margin (BRR and International Partners, 2005).

A multi-donor trust fund for Aceh-Nias, the MDF, was established by the Indonesian Government in early 2005. The main goal of this fund was to attract and pool bilateral and other resources so as to ensure a coordinated approach to the support of rehabilitation activities in Aceh and Nias.⁷ Contributions were also expected from the private sector, foundations, and NGOs. The fund was designed to support two types of activities (MDF, 2005):

1. New projects or new components of existing projects, including the co- financing of existing or new projects supported by multilateral agencies or other financiers.

2. Assistance for government programs that were part of the rehabilitation and reconstruction efforts.

By January 2006 about 66 per cent of the US$530 million pledges had been formalised in the form of a contribution agreement and the MDF had received US$229 million in cash. Disbursements had been made to seven projects amounting to US$79 million. These projects included land titling, rural and urban community recovery, housing and settlements, waste management, and technical assistance to the BRR. By December 2006 the amount provided to the fund had reached US$655 million with pledges from fifteen donors (Table 7 [ PDF 80.7KB | 1 pages ]). About 77 per cent of these pledges had been formalised in the form of contribution agreements and approximately US$480 million had been allocated to 17 projects in four sectors: recovery of communities, infrastructure and transport, capacity building and governance, and sustainable management of the environment. Disbursement to these projects had reached around US$170 million (http://www.multidonorfund.org/).

The Indonesian Government also provided large-scale support for reconstruction in Aceh and Nias. The 2005 government budget allocation for Aceh’s reconstruction (which included some of the funding received from international agencies) was approximately US$880 million (Kompas, 27 August 2005) and in 2006 was approximately US$960 million. Over five years, the total government budget for Aceh’s reconstruction, including government loans, is expected to be around US$3 to US$4 billion (Tempo Interactive, 27 March 2005).

In total, according to the BRR, the composition of funding commitments for rehabilitation and reconstruction activities until 2009 is as follows:

This total amount of over US$9 billion, which is much larger than the initial estimate of damages and losses, reflects an intention to “build back better” in Aceh and Nias. By the end of 2005 around US$4.4 billion had been allocated to specific projects (BRR and International Partners, 2005).

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