Promoting peace and development in Aceh

Promoting peace and development in Aceh

Andrew Steer, World Bank Country Director for Indonesia,
Jakarta

People of goodwill all over the world are rejoicing at the
news of a ceasefire in Aceh, and commending the courage of those
who negotiated and signed the agreement and the people of Aceh to
give peace a chance. Now the task is to implement and deepen the
peace. In addition to the vital task of peace keeping and
monitoring, this will require that development momentum in Aceh
be restored quickly.

Experience around the world shows a very powerful two-way
relationship between the restoration of peace and economic
development. The arrival of peace can immediately improve the
environment for development. And economic development, itself,
can help secure and deepen the peace.

Ending the conflict in Aceh can immediately lead to better
prospects for development. Due to the conflict infrastructure has
deteriorated, business confidence has been very low, credit has
often been unavailable, supply chains have been broken, and
farmers and businessmen pay some of the highest transport and
marketing costs in Indonesia.

These problems can in part be attributed to breakdowns in the
quality of infrastructure caused by the fighting, but they are
also caused by the many illegal levies that producers have to
pay. It is reported that on the West Coast road from Aceh to
Medan alone there have been 87 check posts, at which trucking
firms have spent an average of 60 percent of their revenues in
informal payments.

Travel times have been unpredictable, perishable goods often
spoiled, and customers have had little confidence when or if the
cargoes will arrive. No wonder that most of Aceh's vehicle stock
has stayed off the roads as much as possible, or that its
economic activity has stagnated. The peace agreement can help
build a platform for renewed confidence and growth, and opens the
door for a return to the rule of law.

Evidence from many civil conflict situations around the world
indicates that after a cease fire agreement is signed, the path
to true peace is only beginning. First, the peace must be kept.
Here the right peace monitoring and political arrangements need
to be in place and financed. Second, the peace must be sustained
and deepened. Here it is vital that citizens see that their lives
are demonstrably improved, and believe that government
interventions and the allocation of funds are fair and
transparent.

Experience suggests that the right kinds of interventions
those that build a sense of ownership and partnership among
citizens -- can help greatly in the post-conflict context.
However, the wrong kinds of interventions especially heavy
handed top-down investments, where certain groups are perceived
to be benefiting unfairly -- can re-ignite feelings of
disempowerment. Aceh thus needs to receive generous, but wise,
development support in the coming months and years.

This was an important theme of the Tokyo Preparatory
Conference on Peace and Reconstruction in Aceh on Dec. 3, where
donors committed to support Aceh's development, and discussed
with the Government and representatives of Aceh how best to be
helpful.

The World Bank has recently conducted a preliminary review
(the full text can be viewed at www.worldbank.or.id) of the
impacts of the conflict and development needs. The good news is
that despite years of conflict, on average, poverty rates in Aceh
are still lower than in Indonesia as a whole. However, in the
conflict areas within Aceh, poverty rates are often very high,
especially for highly vulnerable groups such as widows and
internally displaced people.

In addition, public services in Aceh have also been severely
disrupted, with, for example, more than 50 percent of all schools
reporting damage, and absenteeism rates among teachers and
students much higher than the national average. Access to water,
sanitation and power are also low.

There are three immediate priorities for development action in
Aceh.

First, meet needs at the community level. The government and
donors should support quick-impact, community based programs, and
humanitarian assistance. Such programs can help to overcome local
conflict and will have direct impact on people's welfare.

Community based programs can help development at the local
level, and build trust in the communities. These programs
include a broad range of activities already being undertaken by
community groups and NGOs, such as those supported by the UN
through the Community Recovery Program, Japan's grassroots grant
projects, USAID's civil society grants program, and several
important government programs.

The World Bank's own positive experience of working with
government in the Kecamatan Development Project (KDP) and on a
program to support widows and their families in the conflict
areas suggests that expanding this kind of program is the most
useful way to give significant numbers of Aceh's villagers a
quick return on peace.

The KDP is already operating in 2700 villages in Aceh, and
could be immediately expanded to all 5000 villages throughout the
province. It not only provides the resources communities need to
rebuild their schools, clinics, and irrigation systems, but by
helping communities plan and work together on their own projects,
it can rebuild trust and confidence in villages damaged by the
conflict.

The KDP works because it builds on a small number of core
principles that support community participation, of which bottom-
up planning and a strong emphasis on financial transparency are
the most important. Similarly, the programs for widows give
productive resources directly to some of the conflict's greatest
casualties so that their children can continue in school, eat
regularly, and be treated when they are sick.

Second, invest in improved governance and business climate.
There is no more important means to build confidence after a
cease fire than to establish a fair and transparent
administration of justice, increased transparency in government
finances and policies, and anti-corruption measures. For
citizens, especially the poor, this gives confidence that the
system will not be biased against them. For businesses, this
gives confidence that contracts can be enforced and illegal side
payments avoided. A recent survey of investors in Aceh found the
absence of a trusted legal system to be a central concern.

Reviving Aceh's investment climate will be central to
successful recovery, since it will be the private sector that
creates jobs and drives growth. It will be important that a forum
be established whereby investors, small and big, can express
their concerns, and together with government seek to design
solutions. This can help the government design programs and
policies. As the regulatory environment improves, investment in
larger infrastructure such as electricity transmission or
transportation infrastructure becomes feasible.

Several donors, including the World Bank, are prepared to
support governance reforms that will improve transparency,
restore the rule of law, and promote public sector responsiveness
in Aceh as part of the post conflict recovery program. Increasing
trust in the government's ability to make decisions fairly will
give everybody a stake in sustaining peace.

Third, plan for the longer term. The cease fire offers an
opportunity to include all segments of society in designing a
longer term strategy for Aceh's development. This can result not
only in a coherent plan for the future, but can build ownership
among different citizen groups, as they have a solid say in
development priorities, and in how their resources are spent.

Aceh has abundant natural resource wealth, and the Special
Autonomy Law means that it will be relatively well-endowed with
financial resources (currently the fourth highest fiscal
resources per capita nationally). But it is likely that Aceh's
wealth from its natural resources will decline sharply in 5-10
years. Citizens of Aceh should discuss how this situation should
be managed. One possibility, adopted by several countries in
similar situations, would be to establish a scheme whereby the
revenues from natural resources are spread over a longer period
-- perhaps through a trust fund arrangement. This would help
prevent any sharp decline in spending in future years, and would
enable resources to benefit future generations. Public engagement
in such an exercise would also provide an opportunity to
"practice the peace".

At the Tokyo Preparatory Conference on Peace and
Reconstruction it was a agreed that a multi-donor mission visit
Aceh in the coming weeks to assess needs in more detail, and lay
the framework for a participatory public expenditure review. The
review would work with government and civil society to see how
budget allocations can be set so as to reflect Acehnese
priorities. In parallel, donors and the government can work to
unblock existing programs that were suspended by the conflict but
which can be re-started quickly. Finally, donors can work with
Acehnese provincial and local authorities to strengthen their own
planning and management capacities.