34226 Brief for the Consultative Group on Indonesia Public Disclosure Authorized ACEH UPDATE Public Disclosure Authorized Public Disclosure Authorized Promoting Peaceful Development in Aceh Public Disclosure Authorized January 2003 Introduction The signing of the cease fire agreement on This brief is composed of two parts. Part December 9, 2002, provides a unique One is a summary of the findings and opportunity for improving life for the recommendations of the multi-donor people of Aceh. The peace process now missions and a high-level delegation of the needs to be complemented by a phased Tokyo conference co-chairs that have development strategy that will allow Aceh visited Aceh since the signing of the peace to recover from its decades of conflict and agreement. The objective of the missions to provide its people with broad-based was to identify high-priority activities and benefits from its many resources. This brief opportunities for the international has been prepared for the January 2003 community to assist in five broad areas: meeting of the Consultative Group on § support for the peace process, Indonesia, to serve as the basis for continuation of the discussion over Aceh’s § humanitarian assistance, development that began at the Preparatory § community development, Conference on Peace and Reconstruction in Aceh, held in Tokyo on December 3, 2002. § governance and public planning, § restoration of infrastructure. The international community can play a helpful role in peaceful development in The volume of donor financing is le ss Aceh. Support for the peace monitoring important than its quality, since. mechanism, the most immediate priority, government finances are not the main has been established for the present. Next problems in Aceh. The inability to deliver in importance are short-term targeted government services, especially in remote humanitarian measures , quick-impact areas, and the absence of a favorable development programs that show tangible environment for private sector development results of peace to the people of Aceh, and are. monitoring systems to track economic and social development. Part Two contains provides an update on the current situation in Aceh: socio- Donors can also help by providing support economic conditions, the business climate, to the design of a comprehensive public resources and spending, governance, development strategy that has broad and infrastructure. support from all major stakeholders. A credible commitment to such a plan should A Donor Coordination Matrix is included form the basis of long term donor as an appendix. assistance to Aceh. Donor coordination can then be folded back into the established mechanisms of the CGI. i Table of Contents Introduction …………………………………………………………………… i Part One: Opportunities for International Support ………………………… 1 1.1 Support to the Peace Process ……………………………………. 1 1.2 Short-term Humanitarian Assistance …………………………… 3 1.3 Community Reconstruction………………………………………. 4 1.4 Governance and Public Planning………………………………… 5 1.5 Improving the Business Climate …………………………………. 7 1.6 Investing in Physical and Social Infrastructure…………………. 7 Part Two: Conditions in Aceh………………………………………………….. 9 2.1 Poverty, Health and Education Profile……………………………. 9 2.2 The Climate for Business ………………………………………….. 13 2.3 Public Resources, Spending and Planning ……………………….. 16 2.4 Governance Issues ………………………………………………… 21 2.5 Infrastructure Issues………………………………………………. 23 References and Data Sources ……………………………………. ……………. 26 Annex 1: Fiscal Flows to Aceh’s Regional Governments, 2002-3 …………… 28 Annex 2: Monitoring of the Reconstruction and Development Activities in Aceh …………………………………………………… 29 Annex 3: Identification of Activities to Expand the Community Recovery Programme………………………………………………. 31 Annex 4: Description of the Kecamatan Development Project……………… 33 Annex 5: Outline Terms of Reference for Aceh Governance and Public Sector/Regional Public Expenditure Review……………… 34 Annex 6: Donor Coordination Matrix ………………………………………… 37 ii Part One: Opportunities for International Support The Cessation of Hostilities Framework Agreement Between Government of the Republic of Indonesia Four multi-donor teams and a delegation and the Free Acheh Movement (CoHA) was signed representing the four Tokyo conference co-chairs on December 9, 2002. at the Henry Dunant Centre for (Japan, United States, European Union and World Humanitarian Dialogue in Geneva, Switzerland. At a Bank) visited Aceh between December 16, 2002 and press conference after the signing, the Coordinating January 15, 2003. Their effort was focused on the Minister for Political Affairs and Security articulated priorities agreed in Tokyo: five elements of the agenda for peace-keeping and § Support to the peace process, peace-building: § short-term humanitarian assistance, § maintain and strengthen peace; § provide humanitarian assistance and social § community reconstruction, rehabilitation; § governance and public planning, and § implement a democratic political process; § economic reconstruction; and § restoration of social and physical § reconciliation and society-building. infrastructure. In anticipation of the CoHA signing, the Part One of this report presents the findings of these international community met at the Preparatory teams. Details of specific recommendations are Conference on Peace and Reconstruction in Aceh, in available from the teams themselves. Each team has Tokyo on December 3, 2002. The donors recommended follow-up missions participating in the conference agreed that development assistance could and should support and deepen the Aceh peace process and that a 1.1 Support to the Peace Process coordinated approach by the donors would make for more effective use of the aid they could provide. The teams were comprised of representatives from USAID, UNICEF, WHO, OCHA, UNDP, WFP, and The recovery and development process can be IOM. The mission began with two premises: that the divided into three main stages. In the short term, CoHA is not a comprehensive political settlement development assistance should complement the but only a first step toward a permanent solution to humanitarian program with activities that provide the Aceh conflict through peaceful dialogue, and that visible returns on peace. Medium term projects with any long-term effort to reconstruct Aceh physically longer planning horizons should be based on an and socially will not be possible without an end to the examination of the quality of service delivery in Aceh violence. Therefore, it is important that donors seek as a whole, not just in the conflict areas. Restoring ways to strengthen and support the process. Aceh’s formerly vibrant private sector will be a key element of the medium term strategy. For the longer One important way to provide that support is through term, the critical question is how to place Aceh’s direct technical assistance to the "All-Inclusive public financing onto a sustainable basis. Current Dialogue" that is specifically provided for in the projections are that Aceh’s main natural resources – CoHA. The goal of the Dialogue is an election in oil, gas, and forest products – will be seriously 2004 and the establishment of a democratically depleted within a decade. Consideration should be elected government responsive to the aspirations of given to options for investing part of the current the Acehnese people. Facilitation of that process natural resource windfall so that the province can would be a vital contribution to a final political enjoy a long-term benefit stream. settlement and crucial to keeping implementation of the CoHA agreement on track. Recommended Guidelines for Donors§ andAssuming Government stable fromsecurity conditions prevail, assist with preparations for the direct Elements of an ImmediateThe Preparatory Response Conference1 on Peace and Reconstruction in Aceh Tokyo, December 3, 2002elections (called for in the Special Autonomy § Continued support for the Centre for law), to choose provincial and district 1. SupportHumanitarian humanitarian Dialogue and development programs, givinggovernment quick demonstrated heads. returns to peace. To the extent possible, humanitarian aid should build in bridges to the development strategy by promoting § publicSupport transparency for civil and society invo organizationslvement, by careful that targeting, and by building in clear exit strategies or transfersare making to longer a contribution term, sustainable to the programs. process of Humanitarian 2. Short programs-Term also need Humanitarian to be screened for their developmentAll-Inclusive impacts; Dialogue, improperly reconciliation, targeted food aid, for example, can adversely affect on local farmers. human rights promotion, conflict Assistance 2. Unblock existing projects. A number of donor-funded projects – especially in rural areas – are currently prevention, and recovery stalled or disbursing only slowly. Such investments inThe health, teams education, were consisted roads, irrigation, of representatives etc, offer from § perhapsFunding the bestfor opmassportunity media to getcampaigns tangible benefitsand onUNICEF, the ground WHO, quickly. OCHA, Unblocking UNDP, should WFP, be IOM an and immediateradio talkpriority. shows to promote public USAID. awareness and support for the cease-fire 3. Use delivery mechanisms which have proven to be successful in reaching the poor. For the peace and peace process Initially, donors should emphasize districts outside of process to succeed, it is important that the populationBanda