UNITED NATIONS CAPITAL DEVELOPMENT FUND Microfinance
Issue 9 / February 2005

Featured Guest: Ambassador Rezlan Jenie, Indonesian Ambassador to the United Nations:
On Tsunami Relief, Rehabilitation and Reconstruction in Indonesia

Q: Indonesia has suffered terribly as a result of the tsunami in the Indian Ocean. The world has responded by mobilizing donations for the relief effort. What do you think is the best use of these funds?

A: This disaster has triggered a large outpouring of donor assistance and while we wholeheartedly appreciate this assistance, it inevitably creates coordination problems. We do not want to risk either the relief or reconstruction efforts. Hence, the Coordinating Minister for People’s Welfare was in Aceh for the first few days and our government has asked the United Nations and UNDP to support the National Coordinating Board for Disaster Management (BAKORNAS) in coordinating donor support for the emergency relief and initial rehabilitation efforts.

The Government of Indonesia, supported by major donors such as the World Bank, the ADB, and major donor countries, is leading the subsequent rehabilitation and reconstruction phase. To ensure transparency and accountability, the Government of Indonesia has appointed Price Waterhouse Coopers in the effort to help improve the tracking of emergency assistance provided by donors.

Our efforts are being guided by the following key principles. We do not want to simply re-establish the devastated areas, but rather improve the lives of the people based on a comprehensive and holistic design. As we do this, we are committed to listening to the aspirations of the people. It is important to consider these feelings as having a share in rebuilding their lives. We are also mobilizing various experts, including geological experts to rebuild safe and sustainable communities. To achieve this, we have established clear direction, including coordination between sectoral and regional programs at the national and local level. The government is mandated in our constitution to protect and provide for the widows and orphans left behind by the Tsunami and we will make special efforts to address their needs. We have established a joint center, including line ministries and donors to complete the needs assessment plan. The plan focuses on restoring people’s livelihoods, and effective local administration, as well as public infrastructure and services.

Q: As the initial emergency stage passes, what strategies is the Indonesian government considering to rebuild?

A: We are dividing the task into three phases. Relief, rehabilitation and reconstruction. The immediate humanitarian relief operation lasted for two months and was dominated by emergency operations. The rehabilitation phase has been taking place and would last for another year and one half. This phase should allow us to restore services to the minimum levels required. We expect that the full reconstruction, and therefore recovery will be a process taking at least five years.

The challenge at this point is to deal with more than six hundred thousand people who are homeless or badly affected by the disaster, including the provision of water, food and basic shelter while electricity, communications and transport are being restored.

The government has split the oversight of this recovery effort into several parts. First, the National Coordinating Board for Disaster Management (BAKORNAS) and the operational direction of the Coordinating Minister for Social Affairs have the main duty of mobilizing all the resources of the government, including the military. They are also responsible for the coordination of the extensive domestic and international relief effort. Developing the longer run rehabilitation and reconstruction effort has been assigned to the National Development Planning Agency (BAPPENAS). The Coordinating Ministry for the Economy will focus on overall coordination as we restore economic activity in Aceh and North Sumatera.

Q: In the face of such devastation, it must be difficult for financial institutions to avoid falling into the charity role. How did local financial institutions react initially? What challenges are they facing now?

A: Our strategy has a number of elements. First, given pressing budget problems, we are looking to use as much as possible, grant or highly concessional financing. More specifically, we will be looking at existing government and donor projects and restructure them in a way so that they match the present needs in the affected areas.

This is the fastest way to deliver effective assistance through proven mechanisms. Second, we will look at new programs to redesign them to better match the needs in the affected areas. Third, we will be looking carefully over our entire portfolio of existing projects for those with unallocated or even contingency funds to assess how much of this money can be reallocated. Finally, given dimension of the disaster we will of course be assessing what new financing we might need, probably financed through a new multi-donor Reconstruction Fund. Such a multi-donor trust fund would have a number of advantages. It would allow us to use Existing budget mechanisms, project design, procurement etc. and would simplify the government’s management task, as compared to dealing with each donor separately. It will take some work to develop planning and governance structures and we would be interested in the experience of others on this issue.

Q: What role do you think micro-finance can and should play in the post-disaster efforts?

A: One of the most important and difficult challenges facing the affected areas will be rebuilding the income generating activities both in rural and urban areas. The government has the challenge of designing productive reconstruction strategies that take into account the different characteristics of rural and urban economies. Furthermore, there is tremendous emotional trauma and loss of confidence that survivors of the disaster have to overcome. This is because the communal networks and mutual self-help systems of communities built up over generations were instantly wiped out before their very eyes, leaving many helpless and vulnerable.

However, despite all the traumatic experience that the victims had to sustain, the desire to start working and rebuilding is apparent. Markets have reopened while not as extensive as prior to the tsunami. There are even individuals who are keen to have access to their bank accounts with the goal of restarting business operations. This is why revitalizing income generating activities is important in the rehabilitation and reconstruction phase so that activities that were a day-to-day occurrence prior to the tsunami become visible and people can build on a platform that would help them regain a sense of normalcy. Microfinance in this regard, has a very important role to play. I would like to bring your attention to three areas which microfinance can have an influence in.

The first is the vulnerable populations, which comprises of single mothers and orphans. In a recent study done on surviving mothers and newly widowed women in the affected areas, there were three sectors in which the women were involved in and they include agriculture, trade and services. There were also women who made an income through self-employment. In this case, what the single mothers will need is access to micro-financing ideas and know how so that they can have a choice as to what they would like to do.

This brings me to my other two points. The agricultural and fisheries sector was heavily affected by the tsunami. While it is true that much of the soil for agriculture is either permanently damaged or may need years to fertilize again, and many of the fishermen are tempered with fear not only due to trauma but also because of declining fish stocks. It does not necessarily mean that these sectors will die away. In fact, the government has envisioned a strategy that should revitalize these areas. In this context, micro-finance can resuscitate the much-needed local income from these activities because of the low repayment rates and the low risk.

In trade and services, the government is promoting a local economic revival strategy that should focus on the promotion of micro or small enterprises. It is expected that many people will turn to micro-enterprise activities to generate income during the rehabilitation phase. Special attention must be given to women entrepreneurs as they commonly constitute the largest number of micro-entrepreneurs yet are the most disadvantaged in terms of access to productive resources.

In all three areas, the government will use community based approaches and the mass media to reach out to the people.

Q: Is there anything else you would like to comment on?

A: We are touched by the response from the international community in the face of this tragedy. We also greatly appreciate the outpouring of support and assistance from our friends in the international community and our hope that this turns into concrete action to deal with the problem and mitigate future impacts. As the President of Indonesia indicated, this is an opportunity for all of us to work toward a better future not only for our countries, but for the region and the world.