Aceh moves to rebuild shattered economy

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.