After Tsunami Reconstruction: A Grassroots Economy for Aceh?

In a March interview with the Jakarta Post, rebel leader-turned Aceh Governor Irwandi Yusuf points to the difficulties that confront Aceh’s economy past aid-driven tsunami rebuilding: “Currently, with ongoing post-tsunami rehabilitation and reconstruction works, it seems as though Aceh’s economy is stunning.... But that’s only on the surface. The money comes...and is spent on the salaries of the foreign experts and the rest. In Aceh, there’s actually no money. It’s like a big bubble, when it explodes, nothing is left.”

The tremendous inflow of funds did not alleviate poverty, which, according to the World Bank, climbed to 35 percent after the tsunami. (Irwandi put the poverty rate even higher, at 49.7 percent.)

International aid did help with the massive task of reconstruction, though the pace has been slower than the Acehnese had expected. About two years after the disaster, 57,000 houses (out of a goal of 120,000) had been rebuilt, and 1,200 kilometers of damaged roads repaired. Some 782 schools, or 39 percent of the roughly 2,000 damaged, have been repaired.

In the Jakarta Post interview, Irwandi indicated his immediate economic priorities were to fight corruption, launch a labor-intensive program, pursue land reform, and boost education. At present, Aceh depends on a network of trade middlemen operating out of Medan, the capital of neighboring North Sumatra province, who are able to dictate prices. To circumvent Medan’s economic stranglehold, Irwandi seeks to develop Aceh’s port and airport facilities to open direct trading relationships with nearby countries like Malaysia.

Irwandi will also have to confront the widespread extortion that greets truck drivers on Aceh's main transport arteries, from the cities of Banda Aceh and Meulaboh to Medan. Often those demanding illegal payments are soldiers or policemen.

Aceh is extremely resource rich, boasting plentiful deposits of energy and mineral resources, as well as agricultural resources including rice and coffee and shrimp farming. As in so many other countries, however, a key question will be how such resources are developed, who benefits from their exploitation (the new provincial government has introduced tighter licensing for mining operations), and what the environmental consequences will be.

After all, the struggle over Aceh’s natural gas deposits and its timber were key reasons for the decades-long struggle against the central government in Jakarta. The 2005 peace agreement and the subsequent 2006 governing law for Aceh gave the province the right to 70 percent of all revenues derived from its natural resources. But there are some indications that Aceh will have to be vigilant vis-à-vis the powerful central government ministries to ensure that this provision is fully implemented.