Aceh and Nias before the Disasters

There are significant differences between the socio-economic and political structures in Aceh and on the island of Nias. Aceh is a much larger and more heterogenous region than Nias. Aceh is itself a province while Nias is only a small region of the province of North Sumatra (Map 1). Although the majority of the population in Aceh work in the agricultural sector, the economy of Aceh has been dominated for decades by the oil and gas industry. In contrast, Nias has a less sophisticated and a predominantly semi-subsistence economy. Aceh has experienced three decades of serious political conflict while there has not been any serious political turmoil in Nias.

2.1. Economic Conditions in Aceh

Aceh’s GDP in 2003 was approximately US$4.5 billion, about 2 per cent of the GDP of Indonesia. While the Acehnese economy has generally benefited from the regional oil and gas industry, in 2004 the local energy sector contracted somewhat, contributing to negative growth in the province (Table 1 [ PDF 79.9KB | 1 pages ]). The agriculture sector, which makes up around 32 per cent of regional GDP, also plays a key role in the local economy. Agriculture absorbs almost 50 per cent of labour in Aceh. Other major sectors of employment are trade (21 per cent) and public services (18 per cent) (Bappeda Aceh, 2005).

In the early 2000s Aceh’s exports to other parts of Indonesia were small, around 8 per cent of regional output. About 26 per cent of Aceh’s output was exported abroad and 66 per cent was consumed within the province. Imports from other parts of Indonesia and from abroad were a small part, about 6 per cent and 4 per cent respectively, of the total material inputs needed for Aceh’s productive sectors (Athukorala and Resosudarmo, 2005).

Regional inflation (as measured in the provincial capital of Banda Aceh) was moderate in the period just before the tsunami (Figure 2 [ PDF 66.5KB | 1 pages ]).

Aceh’s population was around 4.1 million in 2003. Although, on paper, Acehnese GDP per capita (almost US$1,100) was among the highest in Indonesia because of the statistical boost to measured production provided by the oil and gas sector, in fact many local areas in Aceh did not receive noticeable benefits from the enclave energy sector and were quite underdeveloped. Indeed, before the tsunami the Ministry for the Development of Least Developed Regions had classified eleven districts in Aceh (around half of the total in the province) as “least developed districts”. In 2003 it was estimated that the percentage of poor people in Aceh was almost 30 per cent (almost 20 per cent and 34 per cent in urban and in rural areas, respectively), while the figure for Indonesia as a whole was around 17 per cent (14 per cent and 20 per cent in urban and rural areas, respectively). Aceh was among the five provinces with the highest percentage of poor people (BPS, 2005). The long-term socio-political conflict was widely believed to be one of the major causes for the lack of development in the province (Soesastro and Ace, 2005).

The Indonesian national decentralisation program which became effective in 2001 brought dramatic changes to the public revenue and expenditure patterns in Aceh. Regional government spending in 2004 was double that in 1999. However, the bulk of the expenditure was still for routine administrative expenses (such as salaries and building maintenance) (World Bank, 2003 and 2006b; Bappeda Aceh, 2005).

2.2. Economic Conditions in Nias

With a population of about 700,000 people, Nias is considered to be one of the poorest regions in the province of North Sumatra. The island’s economy is still primarily subsistence-based. There is not much trade between Nias and other parts of North Sumatra and its contribution to the provincial economy of North Sumatra is very small. Per capita income was estimated at about US$340 per annum in 2004. The share of the population living below the poverty line in 2002 was 31 per cent, roughly twice North Sumatra’s level of 16 per cent or the Indonesia-wide figure of 18 per cent. Further, compared to the regions in the North Sumatra province and nationally, human development results were low and signs of progress were also very slow. Close to half of the household heads in Nias only have elementary schooling. About one-third of children between 7–18 years of age did not attend school in 2002. Despite the availability of health centres throughout the island, lack of access to satisfactory basic health services was still widespread because of inadequate services and poor infrastructure (BPS Kabupaten Nias, 2005).

Lack of infrastructure is commonly cited as one of the main reasons for the backwardness of the region. Poor infrastructure limits mobility across the island and isolates villages from markets, leading to low levels of economic development. In 2004 the local Nias economy was still mainly reliant on agriculture and trade services, accounting for almost 37 and 35 per cent, respectively, of the total regional GDP. Trade services in Nias, however, are largely limited to activities conducted in the informal sector. As in other backward regions, the role of local government in the formal sector of the economy was quite high. In 2004, total local government expenditure was around Rp 200 billion (a little over US$20 million), approximately 10 per cent of the Nias GDP (BPS Kabupaten Nias, 2005).

2.3. Conflict and Freedom Movements in Aceh

Socio-political conflict between the Free Aceh Movement (GAM) and the Indonesian government began in the mid-1970s. This conflict escalated in the five years prior to the 2004 tsunami, destroying or damaging about 900 schools, causing a dramatic decline in school attendance, and displacing over 100,000 people. Meanwhile, health care became less accessible because people were afraid to visit medical centres for security reasons (Soesastro and Ace, 2005; World Bank, 2005). Another significant impact was the drop in the number of economic establishments and in the quality of infrastructure in the region. The total number of firms declined from around 7,600 in 2001 to only around 1,200 by 2004. Many roads were not properly maintained and people were often afraid to travel outside of their towns and villages, particularly at night (Bappeda Aceh, 2005).

The basic causes of the separatist movement can be found in the history of the relationship between the people of Aceh and the central authorities in Jakarta. During the Dutch colonial period the region was never formally annexed. Consequently, during the early years of Indonesian independence in the late 1940s there was a strong feeling in some quarters of Aceh that the region should not be automatically incorporated into the new state of Indonesia and that, certainly, the Acehnese people should have been consulted as to whether they wanted to join with Indonesia or to form an independent state. Twenty years later, the centralised mode of government during Soeharto's “New Order” government strengthened this sentiment among some Acehnese, particularly when the central government signed contracts with foreign companies for the mining of natural resources in Aceh without consultation with the people of Aceh. Much local resentment was generated when the Acehnese realised that most of the income from the oil and gas activities in the region flowed to the central government rather than into local coffers.

The armed struggle waged by the GAM guerrilla movement escalated in the 1980s when they allegedly received support from overseas groups. The Government of Indonesia responded with repressive measures and placed the region under Operational Military status. This led to an increase in local conflict, causing deaths and a rise in the number of internally displaced persons. During the military operations, both GAM and the Indonesian government accused each other of violating human rights. The military operation officially ended in 1996. However, the military presence in the region was not reduced, even after Soeharto stepped down from office in 1998. In fact the military presence is thought to have increased in the early 2000s during the Megawati Sukarnoputri administration (World Bank, 2006b).

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