Three Months After The Catastrophic Earthquake & Tsunami (8 of 13)

Mistrust Impedes Rebuilding of Aceh

Indonesia Government Vies To Control Tsunami Funds;
Donors Are Wary of Misuse
By Timothy Mapes
Staff Reporter of The Wall Street Journal
March 21, 2005; Page A15

Jakarta, Indonesia -- As Indonesia embarks on a massive effort to rebuild swaths of Aceh province wiped out by the Dec. 26 tsunami, government officials say coordination is being complicated by foreign agencies' focus on shielding their aid from corruption.

The international effort to assist Asian countries hit by the disaster now needs to concentrate on rebuilding, and shift away from providing immediate relief for survivors, Asian Development Bank President Haruhiko Kuroda said Friday. He was speaking at a meeting of aid and government officials in Manila attended by officials from the worst-hit Asian countries, including Indonesia, Sri Lanka, Thailand, India and the Maldives.

"At this stage, the most crucial point is how to utilize wisely those already-committed resources," Mr. Kuroda said, stressing that donors need to avoid overlap with other agencies and work closely with local governments to ensure donations are well spent.

But in Aceh, a province at the northern tip of Sumatra island that suffered the worst damage in the region, the rebuilding effort is being slowed in part by those very efforts at coordination, as well as by the sheer scale of the disaster. Almost a quarter of a million people are dead or missing out of the province's population of 4.2 million, and volunteers recover and bury hundreds of dead bodies every day as they clear away mud and debris.

Indonesian officials are working on a master plan that will attempt to set out who will rebuild what and where. The World Bank estimates it will cost at least $4.5 billion over the next several years to replace the hundreds of schools, miles of roads, dozens of health clinics and other facilities destroyed by the tsunami and the powerful earthquake that spawned it.

The master plan is due to be released by Saturday. But the senior official in charge of drafting it warns that her work is being disrupted by the refusal of many foreign donors -- including the U.S., Japanese and Australian governments -- to mix their funds into Indonesia's budget because of concerns about corruption.

"I am worried that the well-motivated desire by so many donors to plan their own programs is overwhelming the staff of our government agencies, and even delaying our preparation for the future," Sri Mulyani Indrawati, Indonesia's minister for planning and development, said in a speech submitted this month to the Paris Club, a group of donor nations. "If we are serious about harmonization, then donors should channel a higher share of their funds through the government budget, and the government must demonstrate that it is worthy of this trust."

In an interview, Ms. Mulyani added that she wants more donors to contribute to trust funds set up by the World Bank and the Asian Development Bank, instead of running their own projects. Those funds, she said, are better placed to work with planning officials in developing key projects. Jakarta hopes the bulk of the rebuilding can be financed by foreign donors.

By contrast, many of the smaller aid agencies that have flocked to Aceh often have complex procedures for the release of funds, which officials say hinder their integration into broader plans. The government has said it will scrutinize the work of smaller agencies to see whether they can make a real contribution to the rebuilding effort; those that can't, may be asked to leave.

Yet many aid agencies have deep misgivings about dealing with the government in Indonesia, a country with a history of graft. A survey this month of Asia-based executives by the Hong Kong-based Political & Economic Risk Consultancy, for example, ranked Indonesia as the most corrupt country in Asia. In Aceh, the province's governor is on trial charged with siphoning off state funds for his own use. The governor has denied the charges.

Foreign-based charities also are coming under increasing pressure in their home countries to account for how their funds are spent. They expect to face special scrutiny in Indonesia because of its history of bureaucratic graft and waste.

While Ms. Mulyani acknowledged that corruption is a problem in Indonesia, she also noted that President Susilo Bambang Yudhoyono's government repeatedly has promised to crack down on the problem since it came to power in October. She added that new monitoring systems have been set up to oversee the use of tsunami-related donations, including the appointment of an independent auditor.

The World Bank and Asian Development Bank have hailed their trust funds as a good solution for independent donors to contribute. Both institutions recently created special funds -- expected to total several hundred million dollars apiece -- to pool donations for projects identified in consultation with the government.

But some aid agencies fault the World Bank and ADB for agreeing to turn over the money to the government. The U.S. Agency for International Development is one of many that instead insists on dealing directly with local partner organizations. "We're just continuing to work as we have always worked in Indonesia, which is directly with local partners," said Betina Moreira, Usaid's director of communications in Indonesia.

She noted that the agency has already spent about $50 million on projects in Aceh, and hopes to receive a substantial portion of the $950 million in funds that the U.S. government has pledged to the Asian countries hit by the tsunami disaster.

Josef Leitmann, who will manage the World Bank's special fund for Aceh and North Sumatra, counters that his fund will apply all of the World Bank's standard procedures on funds disbursement. "This will not be a blank check," he said, adding that the fund could be an easy way for smaller groups without their own auditing systems to take advantage of the World Bank's experience in monitoring its spending in Indonesia.

Write to Timothy Mapes at tim.m-@wsj.com3