Aceh disaster won't greatly affect nation's economy

Rendi A. Witular, The Jakarta Post, Jakarta

The economy of tsunami-stricken Aceh is proving to have a high level of endurance as it has been relatively independent and isolated from other provinces in the country.

Therefore, the recent devastation in the province is likely to have little impact on neighboring provinces or on the overall economy, according to a study by Bank Mandiri economists.

Chief economist Martin Panggabean said Aceh fulfilled 80.3 percent of its needs from available resources within the area, with the remaining 9.4 percent obtained from Sumatra, 9.6 percent from Java and 0.7 percent from other provinces.

Because Aceh is relatively self-sufficient, "the devastation in the province is likely to have only a small impact on other provinces or on the country's overall economy," said Martin in a press briefing on Tuesday.

Martin explained that the economic sustainability in Aceh was in part due to insufficient transportation facilities -- crucial to building up economic activities with other provinces -- which had eventually forced the Acehnese to be dependent on local raw material to meet their demands.

According to the study, North Sumatra has the edge in terms of economic relations with Aceh over other provinces on the island. It contributes 81 percent of the total goods going into Aceh from the island, with 10.3 percent coming from West Sumatra, 5.1 percent from Riau, 1.5 percent from Lampung, 1.3 percent from South Sumatra, 0.5 percent from Bengkulu and 0.3 percent from Jambi.

Martin said that 17.1 percent of Aceh's output was distributed and consumed by the local market, while the remaining 66.2 was sold to other provinces in Sumatra, 16.1 percent to Java and 0.6 percent to other provinces.

Of the 66.2 percent for Sumatra, 60.3 percent goes to South Sumatra, which is mostly in the form of gas from the Arun field. Operation of the field by U.S. energy giant Exxonmobil was not affected by the natural disaster.

Of the other Sumatra provinces, North Sumatra receives 20.6 percent of the goods while Riau procures 13.1 percent, Jambi 1.9 percent, West Sumatra 1.4 percent, Lampung 2.4 percent and Bengkulu 0.4 percent.

As for trade relations with Java island, East Java received the most output at 35.3 percent, followed by Jakarta with 22.3 percent, West Java and Banten with 17.7 percent, Bali with 1.1 percent and Yogyakarta with 0.6 percent.

With Aceh's economy being relatively independent and isolated, Martin agreed with the assessment of Minister of Finance Yusuf Anwar and Bank Indonesia Governor Burhanuddin Abdullah, who expressed confidence that the economy would not be affected much by the tragedy.

The government estimates that reconstruction costs may reach Rp 10 trillion (US$1.11 billion) for the next five years.

To quickly help revive the Aceh economy, Martin suggested that the reconstruction should be focused on efforts to open up Aceh's economy.