Aceh moves to rebuild shattered economy

Aceh, with a population of 4.2 million, is always described as a natural resource-rich province, and the people are very proud of their territory's abundant wealth.

Protracted trouble in the province, however, has severely damaged nearly all aspects of life, including the local economy.

Local officials say the unemployment rate is at 40 percent, while poverty is higher than in many other provinces.

Thousands of Javanese transmigrants have deserted their coffee plantations in Central Aceh, while thousands of hectares of oil palm plantations in West Aceh, Aceh Singkil and South Aceh have also been abandoned.

According to the Aceh Bureau of Statistics, the province's economic growth contracted by an average of 0.34 percent from 1997 to 2000, including minus 1.33 percent in 1999 and minus 0.47 percent in 2000.

Its annual budget heavily depends on the general allocation from the central government, even though the province now gets 70 percent of government revenue from the exploitation of natural resources.

Only 9 percent of the 2001 budget for Aceh, totaling Rp 515 billion (US$57 million) was funded by Aceh.

Its economy is also dependent on its neighbor, North Sumatra province, for many things, from the supply of chicken eggs to vegetables.

Most of its electricity needs is supplied by North Sumatra. Also, regencies or municipalities located along the Banda Aceh- Medan highway, like Pidie, North Aceh, East Aceh and Bireun, are more prosperous than other places in the province.

Its strategic geographic position along the Malacca Straits does not help much to reduce its isolation from the outside world due to the poor condition of its ports.

"Our top economic priority is to empower the people. We do not need much financial assistance. People can build their own economy when security is restored," said economist Nazamuddin, head of state Syahkuala University's Post Graduate School.

Many Acehnese, including their top leaders, do not realize that soon they will no longer be able to rely on the local portion of revenue obtained from natural resources, including from the sales of liquefied natural gas (LNG) from its Arun plant.

In 2010, PT Arun NGL is expected to operate only one of its existing six natural gas liquefaction trains due to depleting gas reserves.

Oil reserves, currently exploited by PT ExxonMobil Oil Indonesia, have also decreased over the years.

Unless new oil or gas reserves are found, the province will have to boost production of its agricultural products to compensate for declining gas and oil revenue.

"Many local legislators were shocked when told recently about the declining LNG production. They never thought Arun would soon end its operations," PT Arun's spokesman Irwandar explained in Lhokseumawe.

With the ongoing peace process, although it remains very fragile, there is an opportunity to reconstruct and rehabilitate Aceh.

Now more and more people, including foreigners, are arriving in Aceh to help the Acehnese rebuild their economy.

Several foreign organizations like the British aid organization Oxfam, the United States Agency for International Development (USAID) and the World Food Program (WFP) operate in the province.

Last month, donor countries and institutions from the Consultative Group on Indonesia (CGI) promised to help rebuild the province.

So far only Japan has honored its commitment made during the CGI meeting by providing a US$5 million grant and another $1.2 million contribution for the Joint Security Committee (JSC), established following the peace agreement to monitor its implementation in the field.

"The stability of Indonesia is very important not only for Japan but also for the region," Shigekazu Sato, deputy chief of mission at the Japanese Embassy in Jakarta, told The Jakarta Post.

Nazamuddin, however, warned foreign donors to be more careful in channeling funds to prevent misuse.

"They must find a way to reach the grass roots," said the economist.

Nazamuddin is right. Efforts to reconstruct Aceh's economy could be derailed if rampant corruption is not dealt with.

It is no secret that much of the huge amounts of money pumped into Aceh by the central government to win public support for remaining part of Indonesia has been misused. Some local officials disclosed that at least 40 percent of project funds have been misused.

Also, concessions accorded by the central government, such as the opening of a free port in Sabang, have also been abused. For instance, local officials reportedly profited handsomely from the illegal importation of used cars from Singapore through Sabang Port.

In addition to corruption, extortion is also rampant. Extortion is practiced by both Indonesian security forces and Free Aceh Movement members.

Zubir Baziad, a prominent property contractor in Lhokseumawe, says that GAM collects 10 percent of the value of most projects, and even issues a receipt. Local officials, including military and police officers, usually also turn up to ask for money as "friends".

"GAM has collected the money for years. I do not mind, they are also part of our big family," Zubir said.

GAM commanders have admitted that they collect money from businesses in Aceh as "taxes".

The JSC says such collections are in violation of the peace agreement.

If the Acehnese can eliminate the corruption and the extortion, they can expect successful economic development to follow.