Soon after the Asian tsunami ravaged the province of Aceh in Indonesia two years ago, I flew over the site of the devastation and found it difficult to imagine that children would once again go to school here, that markets would reopen, that life would return to normal. The scale of damage was unparalleled even for those who had worked in other disaster areas around the world. The tsunami inundated a poor community already torn apart by a 30year old conflict claiming 167,000 lives and destroying all major infrastructure in its path.

The World Bank found itself alongside hundreds of other donors, government and nongovernment agencies coming to terms with the enormous task of helping the people of Aceh rebuild their lives. Yet Aceh is slowly but surely recovering.

The tragedy of Aceh and neighboring Nias combined has culminated in the largest reconstruction effort in the developing world. Up to US$8 billion, of which more than half has already been allocated to projects, is expected to be spent by 2009. This will support 1,500 projects to be undertaken by more than 300 donor, government and nongovernment agencies.

Never in history had so many individuals, businesses and countries contributed so much in response to a single natural disaster. Through the Multi Donor Fund for Aceh and Nias, the World Bank is helping manage close to $600 million in grant funding from the generous contributions of the European Commission, the Netherlands, the United Kingdom, and twelve other donor countries and agencies. Forty percent of these funds have already been spent to build housing, bridges, schools, roads, clean water and waste management systems.

Through communitydriven programs, the Fund is creating a strong ownership among the people of Aceh and sense of dignity in their achievements. The Fund is also helping to reestablish a system of land titling and property rights recognition. I still recall the pride of Ibu Kartini, one tsunami survivor, when I handed her a new land title during my visit to Aceh last April. She told me she was going to use her land as collateral to start a new business.

Of course, progress on the ground is never as fast as we want it to be, and many challenges remain. Bureaucratic bottlenecks, for example, have contributed to delays in the distribution of land titles by local authorities. Securing legal rights to land is vital for communities to move on with the process of rebuilding their lives. It will take another two to three years to complete all the reconstruction projects in Acehand that is when the final verdict on the reconstruction effort will be passed.

Reconstruction aside, the story of Aceh is also a story of how tragedy has brought people together. The wave destroyed almost everything in its path, but it could not destroy the sense of community among the people of Aceh. Before the tsunami, Aceh was one of Indonesia's most isolated regions. Several decades of conflict in the province had brought despair. But since the Helsinki Peace Agreement between the Free Aceh Movement (GAM) and the Government of Indonesia negotiated in the aftermath of the tsunami with the able mediation of Finland's former president Martti Ahtisaari representing the EU the people of Aceh have been cultivating the seeds of peace.

Peace agreements are often fragile. Ink on paper doesn't create peace. What does create peace is when all sides take responsibility for making the reconciliation work. International experience tells us peace is more sustainable when those returning home from conflict can find jobs and rebuild their lives. According to a recent World Bank field study, there are now more people displaced in Aceh because of the conflict than there are tsunami refugees. The reconstruction effort is vital to the peace process. At the same time, the peace process offers the strongest foundation for a sustainable reconstruction.

In a promising sign that the peace is holding, Aceh's voters cast their ballots in the first ever direct elections this month. They were free, fair and peaceful. But the challenges before the expected new governor, Irwandi Yusuf, a former GAM figure, are immense. Not only will he and his administration have to deal with the aftereffects of the long conflict, but they will also have to continue the fight against poverty and face the longer term development challenges in the province. This will include protecting the basic rights of all citizens that make up Aceh's unique cultural fabric.

Before the tsunami, Aceh had one of the largest provincial government budgets in Indonesia, mainly because of its oil and gas resources. Yet, partly because of the conflict, it has continued to struggle with one of the highest poverty levels in the country. Today, the promise of peace is creating a renewed sense of hope and stability.

When I recall that helicopter flight over Aceh, I remember being struck by signs of hope amid the horrible scene of destruction. Many of Aceh's places of worship were still standing, signifying the strong spirit and resilience of the Acehnese people that the terrible wave could not destroy. This same resilience is what will drive the development of Aceh forward.

The reconstruction and peace process in Aceh is a work in progress, but it is a story the whole world can learn from. It's a story of how humanity can prevail and triumph after a tragedy of unparalleled scale.

The writer is President of the World Bank.