Aceh urgently needs alternative economy: World Bank
Aceh urgently needs alternative economy: World Bank
Fayen Wong, Reuters/Singapore
Reconstruction and aid cash pouring into Indonesia's tsunami-hit
Aceh province could put livelihoods at risk once the money dries
up unless the economy is strengthened, a World Bank official said
on Thursday.
The Dec. 26 quake and tsunami killed or left missing about
170,000 people, left half a million homeless and shaved 20
percent off Aceh's economy, said Scott Guggenheim, lead social
development specialist at the World Bank in Indonesia.
"The immediate need for short-term aid in the wake of the
tsunami is quickly shifting to the need for help with
reconstruction and long-term economic recovery," Guggenheim told
reporters during a two-day seminar in Singapore called the
Singapore Humanitarian Conference.
The province's unemployment rate is 27 percent and economic
stagnation will likely push 600,000 people below the poverty line
of daily earnings below US$1 within the next 6 to 18 months.
"Foreign investment is also a very important part of the
process. It will help to develop local capacities, engage the
Acehnese and sustain the economy," he said.
The flow of international aid workers, along with supply and
distribution constraints have sent food, housing and
transportation prices soaring.
World Bank data showed Aceh's annual inflation rate to be
running at a high of 17 percent, compared with the average 7
percent in other parts of Indonesia.
"Another downside risk to the economy is that it is facing the
'Dutch disease'," said Guggenheim.
"The Dutch disease means you get inflationary bubbles which
suddenly collapse. That might happen in Aceh and create a huge
shock for the local economy which will take a long time to
recover from," he warned.
Huge amounts of aid streaming into Aceh through non-
governmental organizations have created an artificial economy in
the province, which until the recent signing of a peace
agreement, had been saddled with a three-decade conflict.
"It is essential that the local government anticipates this
(inflation) and take this into the planning process of economic
reconstruction," he said at the conference, where regional non-
governmental organizations shared their experiences on providing
aid in Aceh.
A crucial part of that process is preparing for the day when
oil reserves run dry.
"Aceh is facing a huge decline in it major export -- which is
oil. An ExxonMobil study now shows that by 2011 they won't have
anymore oil so it's very important that they generate alternative
sources of income," Guggenheim said.
Oil and gas production dominates Aceh's gross domestic product
at 43 percent.
"The province's growth prospects will heavily depend on
resuscitating the non-oil and gas industry," he said.
Guggenheim said Aceh's economic future lies in looking toward
its northern neighbors for economic integration.
"Apart from looking at reintegrating into areas like Sumatra,
another way is that they can look north, into Malaysia,
Singapore, Japan and the rest of the region," he said.
The local government could build basic port facilities which
would enable Acehnese to export agricultural or fisheries
products, such as rice and shrimps, to regional countries and
expand its non-oil industry, Guggenheim said.
Still, the overarching concern was for the government to put
in place a stable regulatory framework to boost investors'
confidence.
"The rules of the game are still sketchy and changing too
often. No one really knows who to go to or what to expect,"
Guggenheim said.