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Aceh-Nias Reconstruction and Rehabilitation: Progress and Challenges at the End of 2006

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Aceh-Nias Reconstruction and Rehabilitation: Progress and Challenges at the End of 2006 Aceh-Nias Reconstruction and Rehabilitation: Progress and Challenges at the End of 2006 Suahasil Nazara Budy P. Resosudarmo June 2007 ADB Institute Discussion Paper No. 70 This report was written by Suahasil Nazara of the Demographic Institute, Faculty of Economics, University of Indonesia and Budy P. Resosudarmo of the Indonesia Project, Economics Division-RSPAS, Australian National University. Deni Friawan and Milda Irhamni provided research assistance. The report was produced as part of an ADBI sponsored study of post-tsunami recovery and reconstruction in Indonesia, Sri Lanka, and Thailand undertaken by national research teams. The study was coordinated by Sisira Jayasuriya (Director Asian Economics Centre, University of Melbourne) and Peter McCawley (previously Dean, ADBI and currently Visiting Fellow, Australian National University). The views expressed in this paper are the views of the authors and do not necessarily reflect the view or policies of ADBI nor Asian Development Bank. Names of countries or economies mentioned are chosen by the authors, in the exercise of their academic freedom, and the Institute is in no way responsible for such usage. ADBI’s discussion papers reflect initial ideas on a topic, and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each discussion paper (given in the citation below). Some discussion papers may develop into research papers or other forms of publication. Suggested citation: Nazara, Suahasil and Budy P. Resosudarmo. 2007. Aceh-Nias Reconstruction and Rehabilitation: Progress and Challenges at the End of 2006 . Tokyo: Asian Development Bank Institute. Available: http://www.adbi.org/discussion- paper/2007/06/26/2288.acehnias.reconstruction.rehabilitation/ Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, Japan Tel: +81-3-3593-5500 Fax: +81-3-3593-5571 URL: www.adbi.org E-mail: [email protected] © 2007 Asian Development Bank Institute ADBI Discussion Paper 70 Nazara and Resosudarmo Abstract This study examines the recovery and reconstruction experience of Indonesia, following the December 2004 Asian tsunami that destroyed much of Aceh island, inflicting some 167,000 fatalities and destroying much of the island's housing and infrastructure. This was followed soon after by a major earthquake in the neighbouring island of Nias. A large reconstruction programme was launched by the government, with pledges from international donors to meet most of the reconstruction costs. The changed approach in Aceh following the tsunami paved the way for a peace settlement that ended a decades-long military conflict in the province. However, two years after the tsunami key reconstruction plan targets have not been met and are unlikely to be met in the foreseeable future. The Indonesian experience highlights coordination problems between the many government agencies, international donors, and NGOs; difficulties for reconstruction agencies in using funds effectively; and the dangers of a large funding gap emerging because of underestimation of local cost increases. Lessons and implications are drawn for institutional development and policy formulation to cope with future natural disasters. These have relevance not only for Indonesia but also for many other developing countries. JEL Classifications: Q54, F35, H54, I38, O19 Suggested citation: Nazara, Suahasil and Budy P. Resosudarmo Aceh-Nias Reconstruction and Rehabilitation: Progress and Challenges at the End of 2006, 2007. Tokyo: Asian Development Bank Institute. Available: http://www.adbi.org/discussion- paper/2007/06/26/2288.acehnias.reconstruction.rehabilitation/ ADBI Discussion Paper 70 Nazara and Resosudarmo CONTENTS 1. Introduction ................................................................................................................1 2. Aceh and Nias before the Disasters..........................................................................3 2.1. Economic Conditions in Aceh.............................................................................3 2.2. Economic Conditions in Nias..............................................................................4 2.3. Conflict and Freedom Movements in Aceh ........................................................4 3. The Impacts ...............................................................................................................5 3.1. Human Loss and IDPs........................................................................................5 3.2. Physical Impacts.................................................................................................6 3.3. Economic Impacts ..............................................................................................7 4. The Immediate Response .........................................................................................8 4.1. Rescue and Relief ..............................................................................................8 4.2. Funding ...............................................................................................................9 5. Foundations for Recovery........................................................................................11 5.1. The Master Plan................................................................................................12 5.2. The Aceh-Nias Rehabilitation and Reconstruction Agency (BRR)..................13 5.3. Peace Agreement.............................................................................................14 6. Rehabilitation, Reconstruction, and Recovery ........................................................15 6.1. Land Titles ........................................................................................................16 6.2. Housing.............................................................................................................17 6.3. Livelihoods ........................................................................................................18 6.4. School and Health Services .............................................................................19 6.5. Infrastructure.....................................................................................................20 7. Challenges ...............................................................................................................21 7.1. Managing Expectations ....................................................................................21 7.2. BRR Spending ..................................................................................................23 7.3. Coordination and Commitments.......................................................................25 7.4. Exit Strategy......................................................................................................26 8. Conclusion ...............................................................................................................27 APPENDIX I. List of People Interviewed.....................................................................55 ii ADBI Discussion Paper 70 Nazara and Resosudarmo List of Abbreviations ABAS Aceh Barat Selatan ADB Asian Development Bank ALA Aceh Leuser Antara AusAID Australian Agency for International Development Bappeda Badan Perencana Pembangunan Daerah or Regional Development Planning Agency Bappenas Badan Perencana Pembangunan Nasional or National Development Planning Agency BPN Badan Pertanahan Nasional or National Land Administration Agency BPS Badan Pusat Statistik or Central Statistics Agency BRR Badan Rekonstruksi dan Rehabilitasi (Aceh-Nias) or (Aceh- Nias) Reconstruction and Rehabilitation Agency CGI Consultative Group on Indonesia CIDA Canadian International Development Agency EC European Commission ECLAC (United Nations) Economic Commission for Latin America and the Caribbean ETESP Earthquake and Tsunami Emergency Support Project GAM Gerakan Aceh Merdeka or Aceh Freedom Movement GDP Gross Domestic Product GoI Government of Indonesia IDP Internally Displaced Persons LPEM Lembaga Penyidikan Ekonomi dan Masyarakat or Institute for Economic and Social Research MDF Multi Donor Fund MOF Ministry of Finance MOU Memorandum of Understanding NAD Nanggroe Aceh Darussalam NGO Non Governmental Organization NZAID New Zealand Agency for International Development OCHA Office for the Coordination of Humanitarian Affairs Perpres Peraturan Presiden or Regulation of the President Perpu Peraturan Pengganti Perundang-undangan or Regulation in Lieu of Law iii ADBI Discussion Paper 70 Nazara and Resosudarmo PP Peraturan Pemerintah or Government Regulation RALAS Reconstruction of Aceh Land Administration System Rp Rupiah Satker Satuan Kerja or Working Unit SPAN Sensus Penduduk Aceh dan Nias or Aceh and Nias Population Census UN United Nations UNDP United Nations Development Programme UNFPA United Nations Population Fund UNORC United Nations Recovery Coordinator U.S. United States (of America) US$ United States Dollar (Unless otherwise stated, US$1 was equal to Rp. 8,600 in 2003, Rp. 9,000 in 2004, Rp. 9,800 in 2005 and Rp. 9,200 in 2006) USAID United States Agency for International Development UU Undang-undang or Law WHO World Health Organization iv ADBI Discussion Paper 70 Nazara and Resosudarmo 1. INTRODUCTION Indonesia, the country worst hit by the December 2004 tsunami that struck numerous countries across Asia, is located in the “Ring of Fire” consisting of volcanic arcs and oceanic trenches partly encircling the
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