5. On behalf of the European Commission, Ambassador Jean Breteche, pointed out that the EC has supported the MDTFANS from the outset. Following Pak Kuntoro's account of experiencing poverty and hunger first hand, he advised it is now time to show the population that we are serious in our support. He emphasized four points: (i) As the representative of the EC, he is happy to co-chair the SC, not just because EC is the largest contributor, but because EC can help liaise and coordinate between contributors to the fund and the GOI; (ii) with the MDTFANS being grant-based, there is even more need to pay attention to transparency and accountability; (iii) while noting that some project concepts will be put before the SC today for its endorsement, he wondered what thought had been given to the strategy or road map of how MDTFANS should be applied and there may need to be further dialogue with the GOI and specifically the BRR; and (iv) he wondered what resources the BRR might need as a fledgling agency.

Steering Committee Operating Guidelines
6. Several contributors pointed out that, being grant funds, there is even more need for strong fiduciary controls/safeguards and regular financial reporting and that these aspects are not fully reflected in the SC Operating Guidelines. It was pointed out that the Operating Guidelines deal with specific "housekeeping" matters related to the operation of the SC, itself, and are part of a broader MDTFANS Operations Manual that enumerates, among other matters, fiduciary and monitoring and evaluation responsibilities, including financial reporting, auditing and reporting of results. It was also pointed out that there are obligations built into the resolution establishing the MDTFANS by the World Bank Board of Directors in respect of fiduciary aspects and financial reporting.

7. Contributors endorsed the fact that it was acceptable for administration costs not to exceed two percent. However, they wondered whether the administrative costs of Partner and Executing Agencies were included in this limit or not. Also, while commending the Secretariat and Partner Agencies on the strict operational timelines, they wondered what performance standards would be adhered to by GOI agencies.

8. With respect to the role of the largest single contributor as co-chair, it was suggested that in coordinating dialogue with GOI it may be better to retain flexibility in the guidelines by not mentioning specific topics/ issues listed in para. 3.4 (third bullet). There was no objection to this proposed revision.

9. Incorporating the modification in para. 8 above, members agreed to the proposed guidelines. The meeting was reminded that these guidelines and the MDTFANS Operations Manual, of which they are part, are living flexible documents that can be subject to change by the SC. It was agreed that the latest version of the MDTFANS Operations Manual would be distributed prior to the next SC and any questions remaining unanswered would be addressed at that meeting.

Proposed Grant Project Concepts for Endorsement by the Steering Committee
10. Co-chair Andrew Steer fully took onboard the need for a strategy or road map for application of the MDTFANS rather than endorsing proposals to utilize the fund in an ad hoc manner. Despite this, he was also cognizant of the need for urgency. In respect of the presentations to be made to the SC at this meeting, he pointed out that some already had delivery mechanisms in place i.e. they were "do-able" and would address urgent needs. He reminded members that endorsing a proposal is not, at this stage, granting immediate permission to spend total funds estimated for each project but, rather, earmarks those funds and allows the project to proceed to full appraisal. Later, following screening by the Secretariat, endorsement to proceed to implementation will be undertaken on a "No Objection" basis by the SC.

11. During general discussion in respect of the four projects before the SC, members suggested that the SC should encourage other organizations (in addition to IDA) to both come forward with project proposals to the BRR for future MDTF support, and also to offer themselves as partner agencies. It was suggested also that, if necessary, such organizations that are considered worthy but lack capacity could be given help to develop proposals.

12. Documents relating to each of the projects to be presented to the SC had been provided to members prior to the meeting.

Recovery of Property Rights and Reconstruction of Land Administration System
13. It is essential to recover and protect the land rights and ownership of people in areas affected by the tsunami/earthquakes as well as rebuild the land administration system. Currently there is a huge insecurity of land tenure, also affecting future inheritance, with documents establishing land rights either being lost or destroyed. The Project envisages three phases: (i) recovering land records, (ii) establishing a land occupancy records database and initiating design and reconstruction of land offices, and (iii) rebuilding of the land administration system. It was pointed out that the project will not exclude areas that were not affected by the tsunami. Despite an increase in cost, it was considered essential to title all the land in the province to avoid artificial distortions in the property market.

Discussion
14. Members generally supported the project. For other projects such as housing to be successful, land rights need to be in place. It was questioned whether the amount allocated for the sensitive issue of dispute resolution would be sufficient. The discrepancy in some figures between World Bank and GOI were most likely due to different fiscal years and Co-chair Andrew Steer suggested that figures should coincide with GOI fiscal year (calendar year). Co-chair Kuntoro shared the views of contributors that this was an important project and would form the basis on which other projects can build. After discussion, the executing agency, BPN, has agreed to second experts trained in land management from outside Aceh in order to complete implementation within one and one half years. In answer to a question about the need to avoid duplication with JICA funding the recovery of land documents, Pak Kuntoro advised that it will be the responsibility of BRR as well as the Partner Agency to ensure that projects complement, rather than duplicate, one another.

SC Endorsement No. 01/05

The SC endorsed the concept proposal to utilize $28.5 million for the Recovery of Property Rights and Reconstruction of Land Administration System Project with IDA as the designated Partner Agency and the National Land Agency (BPN) as the Executing Agency, subject to satisfactory appraisal.

This being the first endorsement of the SC, it was carried with acclaim.

15. Co-chair Andrew Steer suggested that the next two projects being the KDP and UPP be presented to the SC together because they are complementary projects currently under execution with similar proven delivery mechanisms.

Community Recovery through the Kecamatan Development Project
16. The objectives of the program are to provide block grant funding to support reconstruction in a number of affected villages using a community-based development planning and management program, which the program also supports. KDP is designed to be a key recovery vehicle. It has already operated in approximately 45% of the kecamatans and the Governor has requested that the KDP become one of the focal points for community recovery. To assist in the relief effort the project is being scaled up. 250 community facilitators are in place already and the program has selected 800 more for training. Manuals are already in place, regional governments are ready, appraisal has been undertaken and, subject to endorsement, the program could be up and running within one month.

Community Recovery through Urban Poverty Program
17. The objectives of the program are to provide support to urban communities for reconstruction and rehabilitation by means of block grants to 400 kelurahans and technical assistance to another 200. As in the case of the KDP, the program will be community driven by either creating or supporting community organizations. These organizations will convey the aspirations and priority needs of each respective community. As in the case of the KDP, UPP is an ongoing program, lessons have already been learned, and the program has been modified to suit the emergency conditions.

Discussion
18. Members expressed concern that the KDP and UPP appeared to be similar projects and there may be a duplication of effort between them. They were advised that the projects were complementary and coordinated with UPP focusing on urban and KDP on rural areas. Members noted that reference was made in the KDP proposal to those "indirectly" affected. This referred to those not only affected by the tsunamis but also as a result of the earthquakes and the fact that refugees also flowed into unaffected areas. In response to questions concerning accountability of the block grants at village level and whether it was intended to contract out work or not, the approach is to create employment for as many people as possible at the village level. The fact that the projects are community-driven, is, in itself, a major deterrent to corruption with the entire community including journalists, keeping a watching brief on activities. i.e. the process is very transparent. In addition, through support to the community organizations, selected villagers would be trained in audit techniques. Because of the broad nature of these two projects and their expected outputs, members expressed concern that these projects might run the greatest risk of duplicating work currently underway by numerous NGOs already working in the affected areas. Members were advised that a Working Group comprised of all NGOs, bi-lateral and multi-lateral donors is already in existence. This records the list of priority requirements coming from the community organizations and the WG operates a kind of sub-district "marketplace" with different donors offering to fund different activities. Likewise, Pak Kuntoro reminded members that, with the BRR's creation, one of its prime functions will be to coordinate such activities. Co-chair Andrew Steer advised that both these programs were on the fast track with appraisal expected to be completed within one week in the case of the KDP, and two weeks for UPP.

SC Endorsement No. 02/05

The SC endorsed the concept proposal to utilize $54.4 million for the Community Recovery through the Kecamatan Development Project with IDA as the designated Partner Agency and the Ministry of Home Affairs and Bappenas as the Executing Agencies, subject to satisfactory appraisal.

SC Endorsement No. 03/05

The SC endorsed the concept proposal to utilize $18 million for the Community Recovery through Urban Poverty Program with IDA as the designated Partner Agency and the Ministry of Public Works as the Executing Agency, subject to satisfactory appraisal.

Community Driven Housing and Settlement Program
19. The objective is to provide technical assistance, block grant funding, and, subsequently, loans to implement GOI's human settlements rehabilitation/ reconstruction strategy utilizing the community-driven approach adopted for the KDP and UPP. The aim is to construct 30,000 new houses and rehabilitate 50,000 existing damaged homes through block grants utilizing local labor wherever possible. Although MOUs having already been signed with other donors such as ADB, UNIDO, GTZ, etc., there is still a need for funds for housing.

Discussion
20. Members pointed out that the project appears to target housing only and they asked why other infrastructure such as water supply, sanitation, roading, schools, etc does not appear to be targeted. This also relates to the need for a strategy or road map for the MDTFANS. They were advised that the housing project is complementary to the KDP and UPP projects. The latter two projects are expected to include other village infrastructure as well as livelihood activities/ microcredits etc. Assurance was given that tertiary infrastructure would be covered by the housing project. Members suggested that it may be inappropriate to include a loan component in the project when the majority of people would not be able to service these due to current lack of livelihood. The loan component is included at the latter stages of the project and allows additional loan funding for those who can afford to build a house larger than the agreed standard area allowable for grant funding. Members also expressed concern, first, as to the amount of funds proposed for the project and whether they can be disbursed and, second, whether the environment could sustain the amount of building materials (timber in particular) that may be required. Since the project has still to be appraised, these concerns will be taken on board and a phased approach could be considered.

SC Endorsement No. 04/05

The SC endorsed the concept proposal to utilize $150 million for the Community Driven Housing and Settlement Program with IDA as the designated Partner Agency and the Ministry of Public Works as the Executing Agency, subject to satisfactory appraisal.

Support for the Agency for Rehabilitation and Reconstruction of Aceh and Nias (BRR)

21. Co-chair Kuntoro reminded the Committee that the BRR has only been in existence for one week and is very much a fledgling entity. Hence, there are numerous opportunities for donors to support it in various ways. In response to a question as to the amount of the contribution from the Indonesian government to BRR, he advised that while core operating expenses such as staff salaries will be provided by GOI, he is seeking other support, which could be in the form of technical assistance, out-sourcing of certain functions to private companies, and office set-up costs. Such assistance is needed urgently if the Bapel is to execute its mission and speed up the launching of projects for the needy in the affected areas. The sense of the Committee was that while core functions of the BRR should be supported through GOI budget, it would be prepared to support BRR in some capacity through MDTFANS but such support would need to be coordinated by BRR with offers of direct assistance from other donors.

Next Meeting
22. No specific date was set for the next SC meeting. Rather, the date and venue will depend on when a critical mass of items for the agenda is reached as well as the availability of the Co-chairs. The Secretariat will notify SC members and observers of the date and location of the next meeting at least ten working days in advance, as per the newly-ratified SC Operating Guidelines.

Closing
23. Co-chair Andrew Steer advised that this first meeting was somewhat unusual in that a lot of time was spent on technical aspects concerning the four project concepts subsequently endorsed by the Committee, possibly to the detriment of discussion on policy and particularly the valid points made in respect of MDTFANS strategy. However, by endorsing project concepts to the value of about $250 million, MDTFANS is seen to be very much in business and it is hoped that this may also induce others to contribute to the fund.

The meeting closed at approximately 1.15pm.

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