"Lessons Learned Form ADB's Support for the Nias Reconstruction Program and the Way Forward Towards Sustainable Long - Term Development"
Statement by
Pieter Smidt
Head, Extended Mission in Sumatera
Asian Development Bank
At the Third Nias Islands Stakeholder Meeting (NISM3)
Jakarta, Indonesia
8 March 2007
Distinguished Guests, Ladies and Gentlemen,
Thank you for the opportunity to share with you our thoughts about the way forward in the reconstruction program with the overall aim to reduce poverty and achieve sustainable long-term development for the people of Nias.
Nias has suffered from poverty and underdevelopment for a long time. The 2004 and 2005 disasters compounded this situation. As a result, Nias is now one of the poorest areas in Indonesia. The ongoing BRR-led reconstruction program offers a unique once-in-a-life-time opportunity to bring prosperity to Nias.
Like most of your organizations, ADB is directly involved in the reconstruction of Aceh and Nias. ADB support for Nias is channeled through ETESP, the Earthquake and Tsunami Emergency Support Project, financed through a $291 million grant from the Asian Tsunami Fund.
The ETESP program for Nias has an outlay of more than $30 million and covers eight sectors. The program is “on-budget” with BRR as the executing agency, except for the housing component which is implemented through both on- and off-budget arrangements, and the microfinance component which is entirely off-budget. ADB has entered into agreements with Un-Habitat and Help eV of Germany for the off-budget part of the housing program.
Distinguished Guests, Ladies and Gentlemen,
What have we learned from ETESP ? This morning, I would like to focus on sustainability, first sustainability in terms of overall economic development, and second sustainability in terms of our joint reconstruction efforts.
Agriculture and fisheries will remain the main engine for economic development on Nias. To attract external markets and the interest of financial institutions, production needs to be coordinated and enhanced. To achieve this, the overall strategy should bring community groups together into commodity clusters through which production is coordinated and enhanced.
Let me illustrate this in the context of fisheries. Expansion of cage culture of high value marine fish is planned under ETESP for which hatchery-reared fish will be used. The hatchery plays a key role in the cluster concept. Being a centre for "seed" supply, the hatchery will act as the information centre for fish farmers organized in groups around the hatchery.
Collection centers run by fish farmer groups will also play a key role. The centers will store live fish until collector ships purchase them for the South East Asian market. The centers would give scope for greater bargaining power for better producer prices and improved services. Both the hatchery and the collection centers could facilitate access to financial assistance from banks. Recognizing the current level of education on Nias, these actions will have to be backed up by technical and organizational training.
The overall strategy for agriculture and fisheries also needs to aim at producing high-volume, high-value products to overcome the transport cost from Nias to Sumatera. This means producing quality raw products followed by “on-the-island” processing to reduce bulk and weight, and increase value.
With modern but appropriate production and processing technology, and the development of market linkages, Nias could have a comparative advantage in the production of a number of products.
Since government funding will remain limited, government support services need to be consolidated. This could be achieved by setting up “livelihood connection centers”. The centers would provide farmers and fishers with “one-stop” shopping for extension services and would connect them to processing facilities, credit and markets. One such center would serve one of the five development regions of Nias: the North, East, South and West and the smaller islands to the South.
Banks need to become active partners in the economic development of Nias. They need to be trained towards providing appropriate micro- and small business financial products. Without an active involvement of the banks, long-term economic development will be difficult to achieve. Recognizing this, ETESP is working together with Bank SUMUT to improve their capacity to channel business loans to micro and small enterprises.
The private sector also has a crucial role to play in the economic development. But considering the isolation of Nias, local governments may need to provide incentives. The best way forward would be to develop public-private sector partnerships where local government will facilitate access to land and public utilities, and also provide the linkage with producers groups. In turn, the private sector brings in capital – if needed with financial support from banks - and technology know-how.
Distinguished guests, ladies and gentlemen,
Let me now switch to our reconstruction investments and its sustainability.
Understandably, many of our livelihood programs are still based on grants. But this approach is not sustainable on the long run, as we all know. Therefore, the time has come to assist communities to acquire skills to develop community livelihood programs which they can manage and for which they can seek financial support from banks and other sources. I believe some of us have started doing so.
We are all under pressure to deliver our programs quickly. But at the same time, there is a compelling reason to take sufficient time to learn from past failures in providing community infrastructure. It is equally important that our investments are designed with affordability in mind. None of us would like to see that after a number of years, schemes we have invested in have fallen apart and are no longer used.
Active participation of the beneficiaries – both men and women – as “stakeholders”, not as “recipients” of assistance is required to ensure sustainability. This also requires time so that meaningful participation can indeed take place.
Investments in over-complicated schemes need to be avoided and energy requirements minimized. For instance in the provision of water supply to communities, it may be better to cover 60% of a village completely for 10 to 15 years using gravity than 90% coverage using pumps for only 2 months. These options need to be explained to communities, and their understanding and agreement must be secured before funds are committed.
Much of today’s reconstruction program is focused on major infrastructure while not enough attention is paid to secondary infrastructure. This renders the overall reconstruction program less effective. The road program on Nias is perhaps an example of this: until now, it does little to improve the accessibility for many remote communities as they are not yet linked to this main road system.
Last, but not least, there is a need for greater participation of the local governments in the reconstruction process. The public sector reconstruction investments need to be embedded in the district plans to ensure funding for recurrent expenditures for 2009 and beyond. At the same time, we are concerned that the local governments may not have the capacity and resources to operate and maintain some of the public infrastructure facilities that are now being built.
Let's take the example of the health sector where spending by government agencies have been low, at less than 7% against the minimum of 15% set by the central government. If the local and provincial governments can not increase their funding, reconstructed health facilities may soon become dilapidated and dysfunctional.
Considering the likelihood of continuing budget constraints, a new health management model is required. A key element of this model would be the empowerment of communities to participate in health care activities, especially at the puskesmas level, while at the same time creating incentives for doctors to work at the puskesmas through a public-private partnership.
The major stakeholders in the reconstruction program may want to initiate a dialogue with the provincial and local governments to discuss the long-term resource implications resulting from our joint reconstruction investments, and how to address these. The Nias Public Expenditure Analysis undertaken by the Universitas Indonesia with support from the World Bank provides excellent background information and recommendations for such dialogue.
Distinguished Guests, Ladies and Gentlemen,
In conclusion, I trust that all of us agree that the ongoing reconstruction program offers indeed a unique opportunity to move towards sustainable long-term development and reduce poverty on Nias. However, some midstream adjustments in terms of direction and implementation approach may be required. At the same time, it is clear that the government, the banks and other financing institutions, and the private sector need to bring in more resources then before the 2004 and 2005 disasters to ensure sustainable economic development, and to support the people of Nias in their efforts to build a prosperous society.
Thank you.
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