Aid workers and residents gathered outside a mosque in Ulee Lhee, near the provincial capital Banda Aceh, as officials thanked foreign governments, aid agencies and individual volunteers for their assistance in the aftermath of the catastrophe.

T-shirts emblazoned with the words "Thank You" written in English, Acehnese, and Indonesian were handed out to those present.

"We would like to thank the world, all volunteers, everybody -- black, white, short, tall, men and women -- for their assistance," Aceh reconstruction chief Kuntoro Mangkusubroto told reporters.

"Today is an important day for us to start rebuilding houses and settlements," he said, adding that he expected 30,000 houses to be completed by the end of the year.

The 172 new projects to build houses, schools, health clinics and other infrastructure will be financed and carried out by 70 local and international non-governmental organisations.

Mangkusubroto said parliament had approved the government budget of 8.4 trillion rupiah (875 million dollars) for this year's reconstruction period.

Half of the money comes from foreign loans and grants.

In another boost to the reconstruction effort, the government has allowed the United Nations High Commissioner for Refugees (UNHCR) to return to Aceh.

"We signed a memorandum of understanding with Mr Kuntoro and after that we came back to Aceh to support the reconstruction," said Robert Ashe, UNHCR regional representative, adding that his agency planned to build 1,000 houses and help communities in Aceh restore their lives.

The UN's refugee agency withdrew from Aceh in March after officials said their presence was irrelevant.

The World Bank said in a report released Saturday that the total amount of rebuilding projects in Aceh were worth three billion dollars, with 1.4 billion allocated to infrastructure and housing and 900 million dollars to social sectors.

"If well used, these funds are enough to build back - but not better. Even within the core reconstruction program, funding gaps remains for sectors such as roads, housing or the environment," said Wolfgang Fengler, the author of the report.

Six months after the tsunami, the challenges of reconstruction are still daunting, the bank said.

"With so many actors involved, it was very difficult to get a sense of where and how overall reconstruction program stands," the report said.

Reconstruction in Aceh had earlier been criticized as too slow but almost two months after the reconstruction agency started its work, the region seems to be making progress.

The agency said it had secured 1.8 billion dollars in aid commitments from international aid agencies, multinational companies and foreign governments since it began work in May.

Aceh was the area worst hit by the December 26 tsunami which was triggered by an earthquake measuring 9.3 on the Richter Scale. More than 131,000 people were killed and some 30,000 missing in the province while more than 450,000 lost their homes.

The disaster also struck Indian, Sri Lanka, Thailand and other Indian Ocean nations including the Maldives and Somalia.

The European Union on Friday expressed concerned about the slow pace of rebuilding work in tsunami-devastated areas.

The response to the tsunami was unprecedented, with 12-13 billion dollars in aid pledges to the UN, other aid agencies and governments -- although not all donors have made good on their promises.

The United Nations predicts that rebuilding the whole region will take another two to five years, and cost nearly nine billion dollars.

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