The Jakarta Post
This is the last of three reports on development in Aceh seven years after the devastating tsunami and the end to around 30 years of bloody separatist conflict. The Jakarta Post’s Nani Afrida explores how the province is struggling to capitalize on the momentum to develop its economy.
Around eight years ago, the remote Tiro district in Pidie regency, Aceh, was known for little other than being the center of a separatist conflict between the Indonesian Military (TNI) and the Free Aceh Movement (GAM) separatist group.
Getting there involved a painstaking journey along a partially flooded road with numerous checkpoints manned by the TNI.
Located more than 125 kilometers from the province’s capital of Banda Aceh, Tiro was the province’s poorest district with run-down housing and high unemployment.
The TNI had every reason to cordon off Tiro as the district was the birthplace of GAM patron Muhammad Hasan di Tiro, who lived in exile in Sweden for 32 years.
For Tiro natives, even getting out of the area gave little hope of escape as the TNI automatically labeled anyone from the district as GAM sympathizers.
Now, however, the district’s residents are seeing great changes.
Large elegant houses belonging to former GAM combatants welcome visitors to a district that was once a killing field for both the TNI and GAM.
Getting there is also easier nowadays with good, well-lit roads.
A new permanent bridge, located near Hasan di Tiro’s humbler family home was completed just a couple of months ago to connect the district with the outside world.
“That used to be a wooden bridge only passable by motorcycle. But now cars and trucks can use it,” said Tiro resident Latifah, 40.
“During the conflict, the roads and bridges in Tiro were destroyed and people were prohibited from entering or leaving the area due to the security situation,” she said.
Economic activity in the district is also vibrant with a nearby sand quarry that employs most of the district’s youth.
While things seem to be better, Aceh’s economic development remains a challenge. Economic development in Aceh has historically been lower than Indonesia as a whole.
Between 2005 and 2009, Aceh’s economy was primarily fueled by post-tsunami reconstruction projects worth more than US$1.5 billion.
As the construction projects reached completion and gas production declined, the province’s economy experienced an 8 percent fall in 2008, with agriculture and manufacturing showing only lackluster growth.
But the economy began picking up last year, growing by 5.19 percent with the highest growth in the agricultural and services sectors, according to the Central Statistics Agency (BPS).
The improving agricultural output included a 10 percent increase in chili production, according to Bank Indonesia (BI).
Based on BI data, the bigger chilli harvest contributed to an ease in inflation last year to 3.43 percent from 5.86 percent in 2010. A limited chilli supply was blamed for the soaring inflation of 2010.
The central bank also highlighted how Aceh is becoming more dependent on government spending to fuel its economy. Last year, the Aceh administration spent Rp 7.9 trillion ($877 million).
Poverty also declined to 19.57 percent last year from higher than 30 percent before 2005, while unemployment also dropped to 7.43 percent from more than 12 percent in 2005.
But creating sustainable employment remains a major challenge for the province’s administration as
investment seems hard to come by.
Investors still perceive Aceh as a risky place to do business, despite being relatively peaceful since the 2005 peace accord that ended the conflict.
The situation is made worse by the rampant collection of illegal levies by former GAM combatants, scaring away potential investors.
A recent eruption of violence ahead of the April 9 local election has also fueled concerns about security and stability in the province.
“It’s difficult to lure investors into the province because of the shooting incidents,” said former Aceh governor Irwandi Yusuf.
“I’ve put a lot of effort into going overseas to meet investors but so far only a few have realized their investment, mostly in mining,” he said.
Aside from security issues, the Aceh administration has been criticized for its failure to focus on economic development and setting out priorities to lure more businesses.
“The government has no focus or target for economic development in Aceh, despite abundant natural resources,” said member of the Aceh Civil Society Task Force (ACSTF) Juanda Djamal recently.
Juanda said that the majority of people in Aceh relied on jobs in agriculture and fishing, which were not the priority of the current administration.
“We are still heavily dependent on neighboring North Sumatra for food and trade logistics,” he said.
Many commodities from Aceh have to be sent to North Sumatra either for processing and export due to the lack of suitable ports and production facilities in Aceh.
For example, Aceh still needs to export its coffee beans through North Sumatra because although Aceh has 15 ports none of them have the facilities to cater for international trade.
“We’re still very much dependent on North Sumatra for food, commodity processing and exports,” said head of Aceh Regional Planning Agency (Bappeda) Iskandar.
He also blamed the lack of infrastructure for the high cost of logistics in Aceh, causing the prices of basic goods to be 25 percent higher than in North Sumatra.
Iskandar said the administration would soon expand highways connecting Aceh and North Sumatra to help smooth transportation and eventually boost economic growth in the province.
The provincial legislators have agreed to allocate around Rp 300 billion this year for highways, according to Iskandar.
“Our focus is on expanding the infrastructure to help the province. We have only had five years of effective government so it’s not unexpected to see several shortcomings here and there,” he said.