Financial Times

After the tsunami: Lessons from reconstruction
Indonesia and Sri Lanka faced the monumental task of rebuilding once their immediate needs were met. Their experience could help other countries respond to disasters, say Paul McMahon, Thomas Nyheim and Adam Schwarz from the consulting firm, McKinsey.

Rescue and relief were the immediate priorities in the weeks that followed the tsunami, but the governments of both countries soon had to face the Herculean task of reconstruction. The challenges were immense. How could Indonesia and Sri Lanka quickly yet effectively meet the needs of communities destroyed by the tsunami? How were they to coordinate the hundreds of local and international aid organizations that had come forward to help? And how could they ensure the efficient, transparent, and corruption-free disbursement of the generously donated funds?

Each of the two governments had reason to doubt its ability to use the new funds and assistance effectively. Neither country had a governance mechanism to coordinate the diverse range of agencies, donors, ministries, communities, and other constituents or the organizational structure and staff to oversee the endeavour. To address these difficulties, each nation independently formed a new agency to plan, coordinate, and administer the rebuilding effort. Indonesia created the Rehabilitation and Reconstruction Agency for Aceh and Nias (BRR), Sri Lanka the Task Force to Rebuild the Nation (TAFREN).

McKinsey provided pro bono assistance to both. Although it's too early to judge definitively, the initial efforts of BRR and TAFREN may offer useful lessons to other governments that must manage reconstruction programs and coordinate a multitude of donor agencies and organizations.

Challenge
The scale of destruction caused by the 2004 tsunami was vast: in addition to 167,000 deaths across both countries, the economic effects were devastating. At least 360,000 jobs were lost in Indonesia and 275,000 in Sri Lanka, and the physical infrastructure along the affected coastlines was destroyed. The international community, however, rose to the occasion: just over $7 billion has been committed to Indonesia and about $2.6 billion to Sri Lanka. In addition, private companies and donor agencies have not only provided technical experts and senior managers to carry out projects alongside local community leaders but also generously donated equipment and much-needed materials.

Coordinating these different entities posed its own problems. In Indonesia, 124 international NGOs, 430 local NGOs, 30 national or multilateral donors, and more than a dozen UN agencies are involved. In Sri Lanka, the World Bank, the Asian Development Bank, and the Japan Bank for International Cooperation accounted for more than three-quarters of all aid before the disaster—a share that has dropped to about one-quarter amid the influx of new donations. In addition, many government departments at the district, provincial, and central level play an active part in both countries. Nine government agencies and ministries in Sri Lanka are involved in issues related to job creation and vocational training for the victims.

Deep-rooted political unrest at the centres of the hardest-hit areas further complicated the relief and reconstruction efforts. Indonesia's 30-year insurgency by the Free Aceh Movement (GAM) has claimed almost 15,000 lives. Sri Lanka is a divided country, with the LTTE (or Tamil Tigers) controlling the northeast region and a shaky cease-fire in place. Furthermore, reconstruction needs were spread across wide areas, and the tsunami largely destroyed the existing rudimentary communications infrastructure. Just knowing who was doing what, and where, was difficult.

Finally, a long-term reconstruction differs significantly from the provision of immediate post-disaster rescue and relief. While speed remains important, proper planning becomes even more crucial. Putting up temporary housing is relatively fast and easy, but rebuilding a viable and vibrant community is not. Critics complained loudly, especially in the early months, that little infrastructure was being rebuilt and that beyond the removal of the debris there was scant evidence of progress on the ground. Behind the scenes, however, plans to coordinate a sustainable reconstruction program were well under way.

At the core of these plans was the creation of BRR in Indonesia and TAFREN in Sri Lanka. Their respective governments charged them with addressing the needs and priorities of local communities and with helping hundreds of local and foreign organizations to minimize any gaps in reconstruction and to avoid overlapping efforts. Further, the agencies were seen as the front-line defense against the corruption and cronyism that many feared would siphon away aid money and hinder reconstruction efforts.

Initial findings
The tsunami's first anniversary allows us to examine the progress of these agencies and to draw some interim conclusions about the successes and pitfalls so far. These insights reflect not only the achievements but also the disappointments. No one would claim that reconstruction in either country has been entirely smooth or that BRR and TAFREN have been entirely successful. Post-disaster reconstruction is a long-term exercise, and the conclusions described here, arranged in three broad categories, present findings that will evolve as the programs progress.

Role and mission
The immediate challenge for the reconstruction agencies was to define their own roles amid the clamour of numerous stakeholders, all trying to influence the recovery effort. At first, established government agencies and ministries in each country, unsure of their own roles in the recovery effort, resisted the directives of BRR and TAFREN. Clearly, when creating new agencies, top political leaders must follow through with a public show of support and grant them sufficient authority to prevent other stakeholders from undermining them. In general, the ground rules, including the roles of established government agencies, must be very clear.

Rather than directly implementing the myriad public and private operations needed for reconstruction, BRR and TAFREN were to act as "servant leaders." Their respective governments charged them with coordinating and facilitating the activities of all government departments, NGOs, and other donors. The agencies also see to it that the needs and wishes of local communities guide the reconstruction programs; in Indonesia, for instance, BRR makes sure that a project has community support before approving it. Furthermore, both agencies monitor the progress of reconstruction and ascertain that information about projects is publicly available. Since the agencies are to exist only as long as they are needed, their respective governments also instructed them to retain minimal facilities and staff, to use existing resources wherever possible, and (after three to five years) to transfer their functions to local government agencies.

Governments can help by setting their sights high. The top priority in the immediate response to a disaster must always be to ameliorate suffering and rebuild communities, but large-scale calamities also provide opportunities to improve the societies and economies of the affected regions. To "build back better" should be an essential mission of reconstruction agencies—as it is for both BRR and TAFREN—and of the officials now pondering the reconstruction of New Orleans and of Kashmir's damaged communities.

BRR's experience shows how tragedy can be turned into opportunity. A core element of the agency's mission is to apply modern and transparent management principles to the reconstruction process, since transparency is critical for the effective coordination of the broader effort. If successful—and the signs are encouraging—these principles would not only benefit the areas directly affected by the disaster but also provide a model of public-sector reform for the rest of Indonesia.. To give another example, the Jakarta authorities and the secessionist Free Aceh Movement responded to the tsunami first with a cease-fire and then by negotiating a comprehensive peace agreement that appears more likely to hold than earlier attempts. And in Sri Lanka, TAFREN persuaded international donors to finance a general upgrade of the road network by arguing that the project would stimulate commerce and bring jobs.

Finally, the agency's mission should transcend political changes. Indeed, the recent presidential election in Sri Lanka cast some uncertainty on the future of TAFREN; observers expect its core structure and mission to remain intact, however. To survive as long as necessary, an agency should avoid being linked too strongly to individual politicians or political interests, apply a transparent and merit-based hiring system, and embrace the servant-leader role in working with other government agencies.

Design the organization
Major infrastructure projects such as ports or provincial roads are best planned and executed at the national level, but most reconstruction activities involve rebuilding villages and towns and so are by nature local. The organizational structure of a reconstruction agency must therefore reflect the distributed nature of the activities it coordinates. Too much top-down, centralized authority is likely to impede reconstruction.

In practice, the right approach involves creating local structures and deputizing local officials to make decisions and help coordinate the different agencies responsible for implementing the reconstruction effort. Any problems should be tackled locally before they are pushed up to the next level. TAFREN now has 11 district representatives working with local administrators to convene sector working groups, set targets, monitor results, and remove bottlenecks. In Indonesia, BRR set up 10 regional offices across Aceh to handle similar tasks.

Diversity of staff—that is, a healthy mix of public- and private-sector personnel—is also essential. Public-sector officials can provide insights into the workings of government and important experience in dealing with other departments but must be motivated and adaptable. People who have worked in the private sector can offer a powerful injection of project-management and performance-oriented skills, although they may not be familiar with the idiosyncrasies of a country's bureaucracy. In Sri Lanka, TAFREN defined target profiles for most of its staff and then hired some 15 people from both the public and private sectors by advertising the jobs and setting pay scales high enough to attract applicants from either of them. In Indonesia, BRR hired 24 (mostly foreign) technical advisers from donors, NGOs, and the private sector.

Bureaucracy
Since reconstruction agencies coordinate the efforts of others, they risk becoming just another layer of bureaucracy. An effective operational approach balances thoughtful planning with speedy decision making and can help such agencies avoid this pitfal. They should focus on six main activities suggested by the experience of BRR and TAFREN.

Planning and policy making
One core role of the agency is helping to create an integrated reconstruction blueprint as a guide for donors and to coordinate the program's implementation by other organizations. This document should outline the requirements of the reconstruction across sectors and districts as well as its overall objectives and guidelines. A good blueprint can eliminate complexity and save time in the long run.

At the outset the agency, in conjunction with relevant government departments should help to develop spatial plans—for example, specifying the location of roads, ports, power plants, and other major new elements of infrastructure. The blueprint should also provide minimum technical and process standards that donors and NGOs must follow. Technical standards could include such things as the minimum size of classrooms and hospital wards or quality guidelines for construction materials.

Process standards are important as well. In Indonesia, agencies that worked with local villages first had to use an established mapping process to reach agreements on land boundaries and titles and then developed a basic plan for the location of homes, roads, and public buildings. Although these efforts can be frustrating and time consuming, they are essential in gaining community support for the long-term reconstruction program and also help to prevent complications later. Similarly, the agency should work with donors to define policies for distributing cash grants, set eligibility criteria, and establish disbursement methods.

Reviewing, generating, and approving projects -- given the diversity of donor agencies and their innumerable projects, the reconstruction agency must review and approve proposals with an eye to eliminating redundancies and filling gaps. When turning down duplicate projects, a reconstruction agency can encourage donors to address particular needs or to help cash-poor agencies find resources for their projects.

Even though many individual donors will resist efforts to coordinate the donor community, the reconstruction agency must insist on their cooperation if it is to fulfill its core role. The scores of fiercely independent donor organizations cannot be relied on to coordinate themselves while they grapple with conflicting agendas, unclear authority, and inadequate information. While some donors and NGOs in Aceh and Sri Lanka grumbled, most came to value strong leadership based on deep knowledge of the situation and of the needs of the affected communities. Reconstruction agencies shouldn't hesitate to tell an international organization where its resources are most needed. They should also respond quickly if commitments aren't met or reconstruction policies are disregarded. Everyone benefits if low performers are identified and then improved or replaced.

Building local capacity -- local governments in Aceh and Sri Lanka were ill equipped to take on the massive challenges of a multibillion-dollar reconstruction effort involving a wide range of national and international actors. The reconstruction agencies provided skilled advisers, training, technology, funds, and planning tools to help local authorities improve their ability to coordinate and to make decisions. Similarly, vocational-training programs to improve skills in the private sector were crucial in rehabilitating the economic base of affected communities.

Bottlenecks
A reconstruction agency must identify and remove project-delaying bottlenecks—in many cases, simply by cutting through red tape. In the early stages of Aceh's recovery, for example, many tons of reconstruction supplies got stuck in customs in Indonesia's port of Medan. Senior BRR leaders and central-government politicians visited it to release the supplies. A reconstruction agency should develop a simple process for cataloguing bottlenecks, allocating responsibility, taking action to solve issues, and tracking results.

Monitoring
After a disaster, information is the most valuable and often the most elusive asset. An agency must build an IT system to help gather information accurately and quickly from donors and affected communities; TAFREN, for example, has adapted a standard, publicly accessible Web-based system for collecting, tracking, and analyzing data and for planning. To get stakeholders to report their activities and needs, the agency must offer both positive incentives (demonstrating the value of a reliable, integrated database to catalog reconstruction needs and donor activities, for example) and negative ones (such as linking approval for projects to reporting requirements). By matching information from donors on how projects are progressing with feedback from a community on its remaining needs, reconstruction agencies can better align supply and demand and allocate resources more efficiently while monitoring the reconstruction effort's overall progress.
Such systems do exist and can be leveraged throughout the world.

Information flows
Finally, the agency must liberally share the information it has gathered about the reconstruction effort with stakeholders of every variety—the better to increase efficiency and confidence. These stakeholders include implementing agencies, which must be informed of standards and policies; international donors, whose continued commitment depends on how efficiently their contributions are used; people in local communities, to whom a mass-communication campaign can convey rights and responsibilities as well as progress updates; and the public at large, whose fears of corruption or mismanagement in reconstruction programs will be assuaged by the transparency of the agency's overall operations.

Beyond the agency
The experiences of BRR and TAFREN suggest the features a reconstruction agency needs to coordinate a rebuilding effort effectively. Yet even if the agency does everything right, certain external conditions must be in place if it is to complete its missio. Many different stakeholders should be partners in the reconstruction effort, which will only be successful if all participants play their proper roles. The central government must give authority and support to the reconstruction agency and help it overcome bureaucratic obstacles.

The authors of this article -- Paul McMahon (Aceh) is a consultant in McKinsey's New York office, Thomas Nyheim (Sri Lanka) is a consultant in the Oslo office, and Adam Schwarz (Aceh) is a consultant in the Singapore office.

National and multilateral organizations must be open to its guidance and accelerate their decision-making procedures. NGOs should participate fully in the government's coordination and information processes and adhere to the highest standards. And the private sector must explore ways to turn its skills and resources into real contributions on the ground.

Indonesia and Sri Lanka have responded admirably to the enormous challenges posed by one of the greatest natural disasters of modern times. The coordinating mechanisms put in place through the respective national reconstruction agencies of the two countries are already providing useful lessons for future post-disaster responses in developing and developed countries alike.

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