Brief for the Consultative Group on Indonesia

January 2003

Promoting Peaceful Development in Aceh

ACEH UPDATE

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Introduction

The signing of the cease fire agreement on December 9, 2002, provides a unique opportunity for improving life for the people of Aceh. The peace process now needs to be complemented by a phased development strategy that will allow Aceh to recover from its decades of conflict and to provide its people with broad-based benefits from its many resources. This brief has been prepared for the January 2003 meeting of the Consultative Group on Indonesia, to serve as the basis for continuation of the discussion over Aceh’s development that began at the Preparatory Conference on Peace and Reconstruction in Aceh, held in Tokyo on December 3, 2002.

The international community can play a helpful role in peaceful development in Aceh. Support for the peace monitoring mechanism, the most immediate priority, has been established for the present. Next in importance are short-term targeted humanitarian measures , quick-impact development programs that show tangible results of peace to the people of Aceh, and monitoring systems to track economic and social development. Donors can also help by providing support to the design of a comprehensive development strategy that has broad support from all major stakeholders. A credible commitment to such a plan should form the basis of long term donor assistance to Aceh. Donor coordination can then be folded back into the established mechanisms of the CGI.

This brief is composed of two parts. Part One is a summary of the findings and recommendations of the multi-donor missions and a high-level delegation of the Tokyo conference co-chairs that have visited Aceh since the signing of the peace agreement. The objective of the missions was to identify high-priority activities and opportunities for the international community to assist in five broad areas:

§ support for the peace process,

§ humanitarian assistance,

§ community development,

§ governance and public planning,

§ restoration of infrastructure.

The volume of donor financing is less important than its quality, since. government finances are not the main problems in Aceh. The inability to deliver government services, especially in remote areas, and the absence of a favorable environment for private sector development are.

Part Two contains provides an update on the current situation in Aceh: socio-economic conditions, the business climate, public resources and spending, governance, and infrastructure.

A Donor Coordination Matrix is included as an appendix.

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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

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Part One: Opportunities for International Support

The Cessation of Hostilities Framework Agreement Between Government of the Republic of Indonesia and the Free Acheh Movement (CoHA) was signed on December 9, 2002. at the Henry Dunant Centre for Humanitarian Dialogue in Geneva, Switzerland. At a press conference after the signing, the Coordinating Minister for Political Affairs and Security articulated five elements of the agenda for peace-keeping and peace-building:

§ maintain and strengthen peace; § provide humanitarian assistance and social

rehabilitation; § implement a democratic political process; § economic reconstruction; and § reconciliation and society-building.

In anticipation of the CoHA signing, the international community met at the Preparatory Conference on Peace and Reconstruction in Aceh, in Tokyo on December 3, 2002. The donors participating in the conference agreed that development assistance could and should support and deepen the Aceh peace process and that a coordinated approach by the donors would make for more effective use of the aid they could provide.

The recovery and development process can be divided into three main stages. In the short term, development assistance should complement the humanitarian program with activities that provide visible returns on peace. Medium term projects with longer planning horizons should be based on an examination of the quality of service delivery in Aceh as a whole, not just in the conflict areas. Restoring Aceh’s formerly vibrant private sector will be a key element of the medium term strategy. For the longer term, the critical question is how to place Aceh’s public financing onto a sustainable basis. Current projections are that Aceh’s main natural resources – oil, gas, and forest products – will be seriously depleted within a decade. Consideration should be given to options for investing part of the current natural resource windfall so that the province can enjoy a long-term benefit stream.

Four multi-donor teams and a delegation representing the four Tokyo conference co-chairs (Japan, United States, European Union and World Bank) visited Aceh between December 16, 2002 and January 15, 2003. Their effort was focused on the priorities agreed in Tokyo:

§ Support to the peace process,

§ short-term humanitarian assistance,

§ community reconstruction,

§ governance and public planning, and

§ restoration of social and physical infrastructure.

Part One of this report presents the findings of these teams. Details of specific recommendations are available from the teams themselves. Each team has recommended follow-up missions

1.1 Support to the Peace Process The teams were comprised of representatives from USAID, UNICEF, WHO, OCHA, UNDP, WFP, and IOM. The mission began with two premises: that the CoHA is not a comprehensive political settlement but only a first step toward a permanent solution to the Aceh conflict through peaceful dialogue, and that any long-term effort to reconstruct Aceh physically and socially will not be possible without an end to the violence. Therefore, it is important that donors seek ways to strengthen and support the process. One important way to provide that support is through direct technical assistance to the "All-Inclusive Dialogue" that is specifically provided for in the CoHA. The goal of the Dialogue is an election in 2004 and the establishment of a democratically elected government responsive to the aspirations of the Acehnese people. Facilitation of that process would be a vital contribution to a final political settlement and crucial to keeping implementation of the CoHA agreement on track.

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Elements of an Immediate Response1

§ Continued support for the Centre for Humanitarian Dialogue

§ Support for civil society organizations that are making a contribution to the process of All-Inclusive Dialogue, reconciliation, human rights promotion, conflict prevention, and recovery

§ Funding for mass media campaigns and radio talk shows to promote public awareness and support for the cease-fire and peace process

§ Funding an experienced advisor to assist in the preparation, planning and format of the All-Inclusive Dialogue including reaching those voices marginalized by the violence, such as those of women and young people.

§ Work with the HDC/JSC process to

identify what role donors can play, if any, in the re -integration of ex-combatants into society, emphasizing employment creation and addressing psycho-social and reconciliation needs.

Support in the Medium Term 2

§ Provide additional technical and legal assistance to facilitate implementation of Aceh’s Special Autonomy law, with emphasis on drafting the many required implementing regulations in consultation with all stakeholders;

§ Support efforts to improve community participation in local gove rnment decision-making and help reduce citizen distrust;

§ Provide capacity building assistance and training to local civil society organizations to help build sustainable operational and financial management;

1 Contact USAID for details. 2 Contact UNDP or USAID for details.

§ Assuming stable security conditions prevail, assist with preparations for the direct elections (called for in the Special Autonomy law), to choose provincial and district government heads.

2. Short-Term Humanitarian Assistance

The teams were consisted of representatives from UNICEF, WHO, OCHA, UNDP, WFP, IOM and USAID. Initially, donors should emphasize districts outside of Banda Aceh, particularly those hardest hit by the conflict (e.g. Pidie, East, North and South Aceh), which, due to security concerns, were also the areas least accessible to aid and development efforts prior to the CoHA. One characteristic of the conflict in Aceh has been burning of schools. Even though in many cases only some of the classrooms, not the entire schools, were burned, the threat against schools led to an exodus of teachers and widespread student drop-outs. The conflict has created two distinctive patterns of displacement. Local people have been temporarily displaced within Aceh when their villages were under threat. JSC is actively working to return the relatively small number still displaced to their communities. A larger number of persons (about 100,000, primarily transmigrants of Javanese origin), left the province and arrived as IDPs in North Sumatra. They wish to return to Aceh but do not yet believe that the situation is sufficiently secure. The large number of killings of civilians has caused particular hardship for the victims’ families. The normal community coping mechanisms for assistance to widows have not been functioning; the victims could be seen as sympathizers of one sort or another, and looking after their families could imply sympathy for one or the other side in the conflict.

Immediate Response § Continued support for the Centre for

Humanitarian Dialogue (USAID)

Recommended Guidelines for Donors and Government from The Preparatory Conference on Peace and Reconstruction in Aceh

Tokyo, December 3, 2002

1. Support humanitarian and development programs, giving quick demonstrated returns to peace. To the extent possible, humanitarian aid should build in bridges to the development strategy by promoting public transparency and involvement, by careful targeting, and by building in clear exit strategies or transfers to longer term, sustainable programs. Humanitarian programs also need to be screened for their development impacts; improperly targeted food aid, for example, can adversely affect on local farmers.

2. Unblock existing projects. A number of donor-funded projects – especially in rural areas – are currently stalled or disbursing only slowly. Such investments in health, education, roads, irrigation, etc, offer perhaps the best opportunity to get tangible benefits on the ground quickly. Unblocking should be an immediate priority.

3. Use delivery mechanisms which have proven to be successful in reaching the poor. For the peace process to succeed, it is important that the population living in those areas that were mostly affected by the conflict see tangible benefits of the new situation soon. Getting resources on the ground quickly is therefore an appropriate goal. However the evidence from many post conflict situations is that hastily designed delivery mechanisms often have disappointing, and sometimes negative outcomes. Fortunately there are a number of proven mechanisms in operation in Aceh to channel resources to communities.

4. Support the establishment of independent monitoring of social-economic indicators. In parallel with the monitoring of the peace agreement, this can play a very valuable role. Credible information on the success of policies and programs will help set development targets, design the appropriate interventions and evaluate success. Civil society monitoring will also contribute to independent information on performance.

5. Use available resources more effectively. Nominal resource allocations to Aceh from the national budget and the subnational autonomy program are the fourth highest in Indonesia, yet individual sectors such as education, health, and others appear to lack adequate resources. Losses come from many sources, e.g., late release of funds, non-competitive procurement practices, weak agency absorptive capacities. A credible program to achieve effective use of existing development resources should be an essential complement to an assistance package.

6. Increase public transparency and accountability. Increasing the accountability of public expenditures and aligning them better with the needs of the people will improve the quality and effectiveness of public investment. Budgets should be published and accessible at all levels of government. Participatory planning, implementation and monitoring mechanisms in government programming can increase the ownership and effectiveness of government sponsored programs and can play a vital role in building trust.

7. Assess the investment climate, and improve it. A strong, efficient private sector will be essential to peaceful development. At present, costs of doing business in Aceh are very high. Conflict has resulted in rent extraction on a large scale. Implementing existing laws and beginning to demonstrate that the legal system can work in a professional, unbiased manner are imperative. An assessment of the investment climate could begin right away, and should involve a careful listening to the concerns of local entrepreneurs as well as large businesses.

8. Save resources for later. Aceh province will retain its high revenue inflows from natural gas, oil, and forest products for less than a decade. Consideration should be given to placing excess government resources into a trust fund. The advantages are twofold. On the one hand it will make the resources available in the future years when oil and gas revenues will not be available; it will also shift spending towards a period when the absorption capacity is likely to have increased.

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Elements of an Immediate Response1 § Continued Support for the Centre for

Humanitarian Dialogue.

§ Support for civil society organizations that are making a contribution to the process of the All-Inclusive Dialogue, reconciliation, human rights promotion, conflict prevention, and recovery.

§ Funding for mass media campaigns and radio talk shows to promote public awareness and support for the cease-fire and peace process.

§ Funding an experienced advisor to assist in the preparation, planning and format of the All-Inclusive Dialogue including reaching those voices marginalized by the violence, such as those of women and young people.

§ Work with the HDC/JSC process to identify what role donors can play, if any, in the re -integration of ex-combatants into society, emphasizing employment creation and addressing psycho-social and reconciliation needs.

Support in the Medium Term 2

§ Provide additional technical and legal

assistance to facilitate implementation of Aceh’s Special Autonomy law, with emphasis on drafting the many required implementing regulations in consultation with all stakeholders (UNDP, USAID).

§ Support efforts to improve community participation in local government decision-making and help reduce citizen distrust.

§ Provide capacity building assistance and training to local civil society organizations to help them build sustainable operational and financial management.

1 For additional information, contact USAID. 2 For additional information, contact UNDP or USAID.

§ Assuming stable security conditions prevail, assist with preparations for the direct elections (called for in the Special Autonomy law), to choose provincial and district government heads.

1.2 Short-Term Humanitarian Assistance The teams consisted of representatives from UNICEF, WHO, OCHA, UNDP, WFP, IOM and USAID. Initially, donors should emphasize districts outside of Banda Aceh, particularly those hardest hit by the conflict (e.g. Pidie and East, North and South Aceh) that were also the areas least accessible to aid and development efforts because of security concerns prior to the CoHA. One characteristic of the conflict in Aceh has been the burning of schools. Even though in many cases only some of the classrooms, not the entire schools, were burned, the threat against schools led to an exodus of teachers and widespread student drop-outs. The conflict has created two distinctive patterns of displacement. Local people have been temporarily displaced within Aceh when their villages were under threat. JSC is actively working to return the relatively small number still displaced to their communities. A larger number of persons (about 100,000, primarily transmigrants of Javanese origin), left the province and arrived as IDPs in North Sumatra. They wish to return to Aceh but do not yet believe that the situation is sufficiently secure. The large number of killings of civilians has caused particular hardship for the victims’ families. The normal community coping mechanisms for assistance to widows have not been functioning. The victims could be seen as sympathizers of one sort or another, and looking after their families could imply sympathy for one or the other side in the conflict. A serious impact of the conflict has been the degradation of what used to be very lucrative agricultural production. Irrigation systems have deteriorated, fields have been left unattended, tools have been destroyed and livestock killed. This

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degradation is one of the main causes for the pockets of poverty that now exist in Aceh. The Government has made a formal request for food aid to supplement national efforts directed at the most vulnerable, particularly returnees, widows and others affected by the conflict. GOI’s preliminary estimates are that some 250,000-300,000 people would need humanitarian food assistance for a period of three to six months. The cost of such an effort would be approximately US$ 5 million. If a donor-funded program is determined to be appropriate, it must be designed to minimize any negative effect on the local food market and food production.

Urgent assistance can be provided almost immediately within existing funding, mostly by expanding programs already in hand. WHO and WFP would need additional funding for expanded programs. At the same time, planning should be initiated for longer-term assistance, requiring the development of new programs and new funding.

Elements of an Immediate Response3

§ Assist the provincial Department of Health in the implementation of a Minimum Essential Package of Health Services (WHO).

§ Expand the ongoing peace education project in Acehnese high schools and conduct participatory child rights workshops, provide psycho-social support for conflict-affected children (UNICEF).

§ Increase ongoing emergency education assistance , including through the provision of school-in-a-box kits, textbooks, supplies, teacher training, and psychosocial support for conflict-affected children (UNICEF).

§ The Emergency Response Fund can fund programs by NGOs in Aceh aimed specifically at the treatment and prevention of scabies (OCHA)

§ Work with education authorities on improving water-and-sanitation facilities and hygiene promotion at schools and will

3 The agency to contact for details is shown in parentheses.

expand emergency assistance for the health sector (UNICEF).

§ Conduct a detailed assessment of the need for donor-funded food aid (WFP).

§ Revise the text and project proposals related to Aceh in the “Consolidated Appeal for Indonesia 2003”, published in November, 2002. The original appeal included projects totaling USD 3.1 million. UN humanitarian agencies, NGOs, the Government and other donors have begun the revision, which will be published in early February 2003 (OCHA).

Support in the Medium Term § Support the revival of the Posyandu

mechanism (community-based maternal-child health service) (WHO).

§ Support strengthening of human resources and district level management in the health sector, as well as drug supplies and pharmaceuticals management (WHO).

§ Initiate data collection on children involved as participants in the conflict, potentially leading to design of special programs to address their issues (UNICEF).

1.3 Community Reconstruction The mission team included representatives of the Japanese Government, UNDP, and the World Bank. Aceh’s villagers have been the group most hit by the conflict, with many leaving for the cities or to other provinces. In many areas, divisiveness and fear paralyzed community organization and stifled growth. Physical infrastructure has been destroyed by the conflict, but an even bigger problem than actual destruction has been the abandonment or neglect of schools, clinics, irrigation systems, water supplies and the like because the professional staff have left and villagers are not able to replace them. Village level responses to the cessation of hostilities are very positive. Many villagers who had left for the cities or IDP camps are returning (although the non-Acehnese refugees are not) and taking up productive

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work. The planting season is underway, and local level trade is picking up quickly. Support for the ceasefire is high everywhere the mission visited.

Government follow-up to the ceasefire agreement has also been positive. In one kabupaten visited, government field teams have made village-by-village needs assessments. School building repairs in 30 percent of the damaged schools in Kabupaten Pidie, one site the team visited, are already underway, although there is a severe shortage of teachers and teaching materials. Government efforts to clear away illegal checkpoints and levies from major roads were applauded by the farmers the team interviewed.

The team identified three main areas where targeted donor assistance for community development is urgently needed. All three can be initiated immediately through programs already in operation but will require additional planning and funding for expansion in the medium term. § First, overall monitoring is very weak and

support is needed to improve both government and civil society capacities to make sure that funds are well-targeted and that they reach their intended beneficiaries. Lack of information about development programming is already a problem for both district government and civil society organizations. The team therefore recommends that the donor community agree on a “code of practice” for organizations working in Aceh that includes the active provision of core project programming information to the NGO forum and to local governments. More details are given in Annex 3.

§ Second, a broad-based program of quick impact projects that reach the village in highly transparent ways is a priority. The need for quick impacts argues for scaling up existing programs rather than creating new ones, which will take too much time. Quick impact projects should also support community-level decision-making and transparent local governance. The mission reviewed two existing programs that meet these objectives and also have broad coverage: the Kecamatan Development

Project assisted by the World Bank, which currently covers more than 2,000 villages, and the UNDP-assisted Community Recovery Program, which provides support to NGOs. Both can be scaled up significantly and will produce rapid results in the field. Costs and other details are provided in Annexes 3 and 4.

§ Third, there is also a need to support

programs designed for specific vulnerable groups in Aceh. The government and NGOs both give priority to support for widows, handicapped people, and highly vulnerable landless and fishing communities. Donor-supported programs for female -headed households could be scaled up at modest cost. These programs must be designed to meet the specific needs of groups marginalized from normal development programs. Programs to support unemployed youth even above and beyond the community quick-impact civil works projects are a special priority.

1.4 Governance and Public Planning

The team was made up of representatives from the World Bank, Japan, and UNDP and received inputs from European Union program staff in the field. It focused on two major themes:

§ the need to ensure broad-based access to public services, while promoting more effective and responsive delivery under the circumstances of post-conflict and special autonomy, and.

§ improvement in the business climate in key sectors such as agriculture and trade by reducing transaction costs and enhancing the rule of law.

The team also took the opportunity to address a number of infrastructure issues in advance of more specialized missions planned shortly after CGI. ADB joined in the compilation and analysis of infrastructure information. The mission benefited from close collaboration with the Provincial Planning Agency (BAPPEDA NAD) and with the University

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of Syiah Kuala (Unsyiah) in Banda Aceh. Summary findings follow. To increase the chances for sustained peace, the international community should assist Aceh in promoting successful governance and institutional reforms. The implementation of the Special Autonomy Law 18/2001 presents significant opportunities but also significant risks. The Provincial Parliament (DPRD) has a major task before it – enactment of the many local regulations (Qanun in Aceh, equivalent to the PerDa in other provinces) required to implement Law 18/2001 – and it has barely begun. For peace to succeed, donors should assist regional government and civil society in promoting public accountability, transparency, and democratic participation. These will be critical to effective planning, resource allocation, and implementation of public services in Aceh. The challenge for the government, civil society and the international community will be to secure accountable and effective service delivery while meeting the urgency to bring about tangible benefit. Accountability, transparency and participation will also contribute to rebuilding trust and a sense of inclusion across civil society and in society’s relationships with government. It is therefore of paramount importance that financial support be administered in such a way that it promotes the conditions for sustainable prosperity and public service delivery. Issues that need to be addressed by the Acehnese themselves include accountability mechanisms (including the issue of direct elections), law and order, relations between province and local governments under special autonomy, and capacity for planning how Aceh’s resources can best be deployed over the next decade. The international community can help by promoting best practices from Indonesia and from post-conflict regions internationally. Forest management in Aceh deserves special attention. Deforestation has occurred more slowly in Aceh than in any other province except West Papua, with the result that more than 60 percent of the province is still forest-covered (Holmes, 2002). Part of the reason is the protracted conflict, which has curtailed both legal and illegal logging and the

operation of timber-consuming industries. Until sustained peace will change that situation as mills reopen and demand for timber expands. Until that time, Aceh has a “window of opportunity” to achieve sustainable management of this resource which, unlike oil and gas, will yield its benefits in perpetuity if properly cared for.

Elements of a Short-term Response § Completion of a Regional Public

Expenditure Review. It is vital that resources be allocated in a way that builds trust. This requires that funds be seen to be used in an efficient and fair manner. A provincial public expenditure review could help greatly in this process. The RPER would be designed to enhance regional government planning capacity under the peace and provide inputs to civil society discussions. The review would be conducted with an identified team from University Syiah Kuala, in close coordination with the BAPPEDA and with the support of the World Bank. More details on the RPER are given in Annex 5.

§ Placement of an international liaison position in Banda Aceh, initially to assist in the RPER but also for donor coordination and on-going dialogues with the provincial and local governments . The position would also be able to facilitate arrangements to meet technical assistance needs that may emerge during peace negotiations.

§ Establish an integrated team in the provincial government to control illegal logging and forest clearing and burning, including Forestry Department, Environmental Management Agency (BAPEDALDA), Police, and Prosecutor’s Office

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Support in the MediumTerm4 § Technical assistance to the Provincial

Planning Agency (BAPPEDA) to develop provincial level information systems, enhance bottom up planning (initially with pilot projects in the same kabupatens where the RPER will take place) and enhance capacities on prioritization and co-ordination (UNDP).

§ Define a process to arrive at a governance reform strategy which responds to the challenges of post-conflict/special autonomy Aceh (UNDP).

§ Prepare a provincial policy and action plan for sustainable forest management, in consultation with all stakeholders , and in collaboration with the Ministry of Forestry, which still retains considerable authority over forested lands (World Bank)

§ Provide capacity building and training assistance to provincial and regency government organizations to enhance legislative, administrative and planning capacity for accountable, effective and participatory management (JICA, UNDP).

§ Further identify specific areas in political institutional building, legal, and police reform for donor support .

1.5 Improving the Business5 Climate

Since the cessation of hostilities, the roadblocks and checkpoints that have impeded commerce have markedly decreased in number. However, illegal levies and outright extortion still remain a constraint to increased prosperity in the province. Continued uncertainly still hampers investments, especially by domestic firms and households. Improvements in security and governance will do much to alleviate their concerns. The team therefore recommended specific steps to address business concerns.

4 Agencies to contact for details shown in parentheses. 5 Agencies to contact for details are shown in parentheses.

Elements of a Short Term Response § Sustained monitoring of the investment

climate, and wider reporting of persistent or rebounding levels of illegal levies. The possibility of on-going polls of business and transport enterprises, in collaboration with HDC/JSC’s monitoring and public information campaigns of instances of extortion, should be explored (World Bank).

§ Establishment of an Aceh Business Forum, providing an opportunity for genuine dialogue between the business sectors and the government (World Bank).

Support for the Medium Term

§ When conditions pe rmit, review the suspended study project for Sabang Integrated Regional Development including study scope and possible target area refocusing (JICA).

1.6 Investment in Physical and Social Infrastructure

The damage to physical infrastructure is not as great as that suffered in many other post-conflict situations. Well-targeted programs can quickly and effectively bring about a revitalization of key pieces of infrastructure including utilities, schools (4,648 classrooms damaged out of 30,642), clinics, irrigation systems, and other public facilities. Communities themselves can play an important part in this process, assisted as needed by the projects described under Community Reconstruction above. Electric power shortage in Aceh was an issue cited as an acute problem by the provincial government, PLN, businesses and many other stakeholders. The present power shortage in Aceh has to be addressed through operational measures by PLN, as implementation of any new power generation capacity will require at least two to four years, and probably longer. The JBIC-ADB hydroelectric project at Peusangan can be examined for restarting when security conditions permit but will not in any case be ready to generate power for at least five years. The short-term

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possibility that appears most promising is for PLN to buy surplus power from captive power plants owned by large industrial consumers (fertilizer and petrochemical plants) in Aceh. Their combined installed generation capacity is reportedly 485 megawatts (MW), out of which 47 MW is already interconnected to the PLN grid. As shown in Annex 6, ADB, JBIC and World Bank have projects under implementation that can directly address needs in irrigation, agricultural extension, roads, urban infrastructure, schools and decentralized health services. Many of them have been slowed or suspended as a result of the conflict. These offer substantial resources that can be put to use in Aceh, either as presently designed or when adjusted to address pressing needs in the post-conflict situation. However, to ensure the most efficient use of these resources, the donors and executing agencies must coordinate carefully.

Elements of Short Term Response

§ A follow-up mission on health, education,

and infrastructure issues, ideally in early February 2003. The mission is currently being planned by the World Bank, in collaboration with ADB, JBIC and other partners.

§ Restore/restart existing projects in health, education, irrigation, agricultural extension, urban infrastructure, water supply, and road sectors (ADB, JBIC, World Bank).

Support in the Medium Term § Assist PLN and provincial government in

exploring and, if feasible, negotiating arrangements for purchase of surplus electric power from self-supplied private industry (ADB).

§ Examine measures for urgently required urban drainage improvement to alleviate damages suffering from frequent flooding (JICA).

§ Review and update highway transportation plan for Aceh in consultation with local governments and other stakeholders. Technical assistance for this purpose is already available in an existing project supported by World Bank.

§ Assist in road rehabilitation through Second Road Rehabilitation Project now under preparation by ADB, implementation period 2004-2006. Notional allocation to Aceh US $18 million (ADB).

§ Examine the feasibility of re -tendering for the Hydroelectric Power Plant Project at Peusangan in Takengon District (ADB/JIBC).

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Part Two: Conditions in AcehPart Two is intended to provide an update on Aceh that will helpful to CGI members as they seek ways to support peaceful development in the province. It consists of five sections.

Section 1 provides an initial assessment of the socio-economic situation in the province of Nanggroe Aceh Darussalam, with particular attention to poverty and health indicators and education. It compiles survey data from the national bureau of statistics (BPS); administrative data collected and socio-economic surveys undertaken in the past year in Aceh with World Bank, WHO, and Asian Development Bank assistance; the conclusions of a World Bank mission that visited Banda Aceh in November 2002; and additional information obtained during the multi-donor missions to Aceh in December 2002 and January 2003.

Section 2 reviews the business climate in Aceh, with a discussion of some actions in addition to improvements in governance (discussed later) that could help restore investment.

Section 3 addresses public resources and spending. It is provided to assist in evaluating urgent needs for additional assistance and to be a starting point for the governance work included as a priority in the Provincial Government’s program for reconstruction of NAD – e.g., to increase transparency and accountability, improve public finance management, and promote public consultation. The information on budgeting and planning in the report presented at the Tokyo on December 3, 2002 has been updated with details on planning processes obtained during the field visits in January 2003. Areas where strengthening is needed and donor support would potentially be useful are also discussed in more detail.

Section 4 covers other aspects of governance (including law enforcement), and Section 5 describes the current situation with regard to critical elements of infrastructure. It is important to underscore that for

all topics this is still a preliminary analysis. There are several cases where “next steps” include field missions or targeted analytical work before details of potential donor support can be defined.

2.1 Poverty, Health, and Education Profile

According to the 1999 Susenas data,6 and using an aggregated, consumption-based definition of poverty, Aceh is not a poor province. 15 percent of the rural population was categorized as poor, while this was the case for 5 percent of the urban population. Aceh is ranked as Indonesia’s fourth or fifth richest province, depending on whether one focuses on rural or urban poverty.

Current wage data for unskilled labor indicate that wages are not below the national average. According to data collected by the bureau of statistics, agricultural wages in Aceh increased since 1996, while they fell nationally. The KDP survey asked for daily wages of ojek (motorcycle taxi) drivers and found that they earn on average 27,000 Rupiah per day in Aceh compared to a national average of 20,000 Rupiah.

However, poverty comprises many other aspects than just consumption, and it is in these areas where Aceh faces the greatest challenges. Table 1 provides descriptive statistics for the poor, middle and rich households. Education strongly correlates with poverty. The poor in the Susenas and Poverty survey have similar housing conditions. About half have earth or wooden floors, access to safe drinking water and access to electricity. Access to safe drinking water and electricity compare unfavorably with the rest of the Indonesian poor.7

6 This was the last year that Susenas was carried out in Aceh. 7 The housing conditions of the middle and rich in the Poverty Survey are substantially better than in the Susenas which probably more reflects the sampling methodology than any changes in the housing conditions.

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Aggregate poverty figures can conceal high poverty incidence both in relatively small geographical areas and in particular socio-cultural groups. Female headed households are significantly poorer than male headed households. Of the 75 female headed households included in the Poverty Survey, 64 were categorized as poor. The incidence of poverty among female-headed households is much higher in Aceh than in Indonesia as a whole. Internally displaced people (IDPs) are another vulnerable group that do not show up in large aggregates. Their poverty status is well documented in three studies.8 IDPs often lack basic services in health and education.

Health

The main problem in the delivery of health services comes from the inability to serve remote areas. Aceh has no lack of health personnel, but health personnel often refuse to work in rural areas. At the same time, urban areas have an excess of health personnel that are poorly utilized and that strain the city budget. The government works with incentive mechanisms, such as high salary offers from the districts, and the policy that specialists who agree to work in NAD will only have to do half of the required service time for newly graduated specialists. This has not been enough to attract staff to serve in high-risk rural areas.

8 World Food Programme: “Report on Livelihood of IDPs in Indonesia”. Drafts for Aceh Utara, Aceh Tengah, and Aceh Barat.

The Poverty Survey shows that 41 percent of the Puskesmas (public health centers) have sufficient staff to provide service, and 44 percent indicate that they have sufficient medicines. The figures drop sharply for auxiliary health centers to 17 percent. Stocks of essential medicines are usually sufficient for about 12 days. Around 25 percent of the Puskesmas indicate that their infrastructure is damaged, and 34 percent of the auxiliary health centers indicate that they operate from a damaged building. The KDP survey found low budgets for the Puskesmas compared to the rest of the country. The average budget, including financing from Dinas, JPS-BK and patient fees, equaled 35 million for the 15 Puskesmas which provided complete data. The national average was 76 million. The Posyandu (maternal and child health service) program has been disrupted by the conflict and needs to be rejuvenated. Morbidity and utilization

Contrary to the rest of the country, the poor in Aceh report being sick more frequently than do the rich (see Table 2 below). It is a common finding that self-reported illness increases as one gets richer. (The poor often cannot afford treatment or time off work, and thus tend not to report). The fact that in Aceh the pattern is reversed indicates that the poor may experience significantly worse health.

The utilization rates in the poverty survey are higher for all groups, indicating that utilization increased

Table 1: Key poverty indicators

Poor Middle Rich Indonesia Aceh Indonesia Aceh Indonesia Aceh

Susenas 1999

Susenas 1999

Poverty survey 2002

Susenas 1999

Susenas 1999

Poverty survey 2002

Susenas 1999

Susenas 1999

Poverty survey 2002

years of education [aged 18-65 in 1999, 68-2002 in 2002] 5.1 6.2 7.2 6.6 7.2 9.4 9.9 9.9 10.3fraction of female headed households (%) 8.3 12.3 12 8.2 9.5 1 11.0 11.7 3house has earth, wood or bamboo floor (%) 54 52 56 34 35 3 14 22 3Has access to safe (pipe, pump, bottled, covered well) drinking water 65 50 52 76 66 84 90 79 92Has electricity (%) 69 53 50 84 70 86 96 88 94

11

since 1999, as it did elsewhere in Indonesia. Both surveys show that the poor in Aceh more often rely

on self-treatment than do the rich. The costs of treatment are a major obstacle for the poor. When asked why they did not seek modern treatment, the most common (34 percent) response was that it was too expensive. Maternal health/early childhood development

Village midwives play an important role in providing maternal care. However, the village midwife program is at risk; many will complete their final national contracts in January, and the local government has not made the resources available to continue this program. The Poverty Survey indicates 51 percent of births are attended by a village midwife. Vaccination rates are low in Aceh compared to the national figures. According to the Poverty Survey, 72 percent of the children under 5 received vaccinations in Aceh in 1999, compared to 83 percent nationally. But the last PIN (National Immunization Day) was considered successful. Coverage was reported to be 102%, owing mostly to a major socialization effort to support PIN, including approaching the GAM.

Administrative data collected by provincial staff show a similar picture. Table 3 shows program coverage for year 2001, based on district reports. Birth delivery assisted by health personnel for example was only 55%. Severe malnutrition among children is 4%, which is higher than average. Prevalent communicable diseases are tuberculosis,

malaria, diarrhea, and dengue. Disease control programs are reportedly not running smoothly.

Health promotion work is very limited: only Rp. 200 million is available to support this program in 2002. The main health information system, SP2TP, no

longer functions, but individual programs still submit their reports to the province.

Education

Enrollment rates in Aceh are not very different from the rest of Indonesia (see Table 4). In 1999, the pattern was virtually identical for primary education,

Table 3: Coverage of selected health services in 2001 in Aceh

Selected Health Services Coverage Vaccinations Difteri,Pertusis,Tetanus 1 Polio 4 Measles Hepatitis B 1 Difteri tetanus 1 (school children) Tetanus toxoid 2 (school children) 1st ante natal care visit 4th ante natal care visit Tetanus Toxoid 2 (pregnant women) Other Iron tablet distribution Birth delivery assisted by health personnel

84.2% 68.9% 71.2% 66.1% 36.3% 37.1% 86.8% (see above) 74.2% 61.3% 3.1% (very low) 65.5% (see above text)

Source: Provincial health ministry Aceh.

Table 2: Utilization of basic health services

Poor Middle Rich Indonesia Aceh Indonesia Aceh Indonesia Aceh

Susenas 1999

Susenas 1999

Poverty survey 2002

Susenas 1999

Susenas 1999

Poverty survey 2002

Susenas 1999

Susenas 1999

Poverty survey 2002

Percent ill in past month 21.5 22.4 29.2 23.5 21.2 19.9 25.0 19.3 19.2Percent ill and sought care in past month 8.4 7.2 16.7 10.4 11.2 16.1 12.3 10.9 16.7Percent ill and that used modern care 8.5 7.6 15.5 10.6 11.4 15.5 12.6 11.0 16.5Percent ill and that used traditional care 0.4 0.6 1.2 0.4 0.3 0.6 0.4 0.2 0.2Percent ill and that self- treated 12.8 14.0 5.1 14.5 12.1 1.1 15.3 9.9 0.4

12

and for junior secondary Aceh scores even higher in terms of net enrollment rates. None of the surveys shows sex biases in education enrollment. The Poverty Survey shows lower enrollment rates for primary, and higher for junior secondary. Junior secondary enrollment increases with wealth according to both surveys.

School attendance is a problem in Aceh. The KDP survey covered 13 primary schools in Aceh and found that 73 percent of the boys and 71 percent of the girls registered were actually attending class. The national averages in the school facilities survey were 86 percent for both sexes. The Poverty Survey recorded an attendance rate of 85 percent at the primary level, 86 percent at the junior secondary level and 82 percent at the senior secondary level. This is well below the national average; the 2002 national household survey shows an attendance rate of 95 to 96 percent at all levels.9 The multi-donor mission was informed that the government is providing scholarship assistance to make school attendance possible for poor families but can meet only 35 percent of demand. Teacher attendance is also lower than the national average. The KDP survey found 78 percent of the permanent teachers present at school at

9 Household surveys tend to report higher school attendance rates than facility based surveys.

the time of the interview, compared to a national average of 89 percent.

The Poverty Survey found that 46 percent of the primary schools are damaged, but still functioning. Fifty-one percent reported no damages. 64 percent of schools report damaged desks and chairs. On the other hand, all schools reported having a blackboard and 78 percent reported sufficient light in the classroom for reading.

Reports from Dinas Pendidikan (Department of Education, NAD) confirm this picture. Damages to public schools are evident in the main conflict ridden areas, although levels of destruction vary by region. For example, Central Aceh Kabupaten reported about 15 percent (43 of about 300) of its schools as having been destroyed. Three of these had previously already been rebuilt. Aceh Utara informed the mission team that 14 SD (primary), 11 SMP (junior high school) and 4 SMA (high school) were burned (of just under 500 schools in all) at an estimated replacement cost of Rp. 9 billion (US$ 1 million est.). Overall, 4,648 out of 30,642 classrooms were shown as damaged in 2001. Existing schools also need additional furniture and teachers in the short term. Ongoing projects may therefore be better utilized if adjusted to allow financing of rehabilitation activities rather than being limited to building new schools.

Table 4: Enrollment in Basic Education

Poor Middle Rich Indonesia Aceh Indonesia Aceh Indonesia Aceh

Susenas 1999

Susenas 1999

Poverty survey 2002

Susenas 1999

Susenas 1999

Poverty survey 2002

Susenas 1999

Susenas 1999

Poverty survey 2002

Boys net primary 90 91 87 94 96 79 94 97 67Gross primary 105 106 110 110 113 92 109 111 79

Net junior secondary 40 46 56 62 62 74 77 82 67

Gross junior secondary 54 59 87 80 74 104 98 94 131Girls net primary 90 94 87 94 93 86 93 97 73Gross primary 106 105 109 109 111 93 108 108 89Net junior secondary 42 46 65 63 56 72 76 84 63Gross junior 54 56 97 80 77 114 97 91 83

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Government programs to address the school problems are encouraging. The multi-donor mission found that repairs are underway at 30 percent of the schools that remain damaged in Kabupaten Pidie. A total of 69 schools were damaged at one time or another during the past three years of conflict, and all but 14 had been repaired (but some redamaged). World Bank experience throughout Indonesia indicates that community involvement in the prioritization and rebuilding of schools is important and effective, often more effective than carrying out the work through contractors.

Many persons interviewed during the multi-donor mission stated that high levels of trauma among teachers and students in areas touched by conflict were perhaps an even more significant problem than physical damage to facilities. There were 45,737 reported public and private teachers in Aceh in 2001, of which 27,434 were at SD, 10,735 at SMP and 7,568 at SMA (including madrasahs, ibtidaiyah and Aliah). As is, there is a need for additional teachers, especially at the secondary level and for certain subjects (i.e. math, chemistry, physics). An insufficient fraction of the teachers that are present meet the basic requirements for teacher training: 33.56 percent for SD, 49.22 percent for SMP and 62.68 percent for SMA. Additional incentives are needed to attract teachers to conflict-prone areas.

Funding for education is assured through the Special Autonomy Law that states that 30 percent of funds must be allocated to education. The most significant challenges appear to be in implementation. The use of these funds in 2002 and 2003 still needs to be clarified. Allocations are going to the Dinas Pendidikan, but the 30 percent is being defined to include allocations for higher education, culture, sport and youth programs. The provincial education agency received 20 percent of the allocation while 25 percent of the budget went to local government in 2002.

The provincial government transferred 90 percent of the local government share through specific allocation and the rest as block grants mechanism. During the multi-donor mission, local governments complained about this level of earmarking, and said that it detracted from their priority activities. These disputes show the disparate views on responsibilities and authority of local governments and suggest a

worrisome trend toward “recentralization” by the province. The province appears intent on allocating most resources to doubling teachers wage supplements in the next year.

At the school level, both the Poverty Survey as well as the KDP survey were unable to obtain reliable budget information. School administrators were highly reluctant to provide financial information. This is consistent with the reality that in conflict situations, financial information can be politically sensitive and thus is difficult to collect. It is also generally reflective of the low level of transparency in the province. The KDP survey was able to collect budget information only from 21 out of 49 schools, the Poverty Survey only from 75 out of 260 schools.

More specific needs assessments will have to be made in terms of physical and non-physical needs in education, and how these are presently being managed. The fielding of SUSENAS 2003 in January/February will improve our knowledge of welfare in the province at the local government level, but other initiatives like a full KDP survey later in the year or a more concerted schools and schools financing survey can help.

By way of summary, the main conclusions of this poverty overview are that:

• On average poverty rates in Aceh are below the national average;

• For the groups most directly affected by the conflict, however, poverty rates can be high;

• The quality and coverage of public services in Aceh have been disrupted by the conflict and will require corrective actions to restore them..

2.2 The Climate for Business

In the long run, private sector growth will be the foundation for Aceh’s development and success in meaningful poverty reduction. Oil and gas sector, which are accounted to the mining and manufacturing sector, accounted for 48 percent of Aceh’s regional income in 2000. However, this sector is largely of an enclave type and impacts the economy primarily

14

through channels such as fiscal revenues (see next section).

Table 5, which compares growth in non-oil and gas GDP in Aceh with growth in national GDP shows a pre-crisis economy in Aceh more robust than for the nation as a whole. Moreover, the reduction in provincial GDP that occurred in 1998 and 1999 was smaller than that experienced nationwide, and though Aceh’s return to positive growth has lagged, estimates for 2002 suggest it has nearly caught up.

Most Acehnese continue to depend on the agricultural sector, especially the poor (see Table 6). The sector includes plantation crops, estate crops, and forestry, many of which are traded beyond the provincial boundaries.

Insecurity is Costly for Business

Businessmen, bankers, and government officials are

unanimous in their opinion that the number one requirement for restoring growth in the private sector is peace and security. Without security in the rural areas, farmers in this largely agricultural province

Table 6: Aceh’s Economic Structure

Sector Non poor

Poor Aceh RGDP 2000*

Agriculture 60.28 75.59 57.1 Mining 0.12 0.25 1.1 Industry 5.08 5.92 10.9 Electricity 0.09 0.09 0.3 Building 2.89 2.00 4.3 Trade 15.20 8.12 11.1 Transportation 2.99 2.52 8.8 Finance and Other Services

0.35 0.13 1.2

Community Service 12.99 5.38 5.1 Total 100.00 100.00 100.0

Source: SUSENAS 1999, BPS *non-oil and gas

can’t work their fields or plantations and can’t get their produce to market. Poor security on the main highways has meant that goods traveling between Medan and Aceh arrived irregularly and at higher cost. When the transportation system can’t operate, neither people nor goods can move efficiently, markets don’t work, and the economy is paralyzed. Thus the agreement between GAM and the Government must come with improved security in all areas, from the most remote village to the main highways, if the economy is to restart and people are to rebuild their livelihoods.

Transport Costs

Box 1 presents one view of the pre-CoHA situation. The multi-donor mission corroborated it, with variations. For instance, by one account, GAM was previously asking Rp.5 million for each truck as an annual tax. Before the CoHA there were more than 100 checkpoints on the Trans-Sumatran Highway

between Aceh and Medan. At each checkpoint, a trucker had to pay between Rp.30,000 and Rp.50,000. In addition there were “wild” checkpoints, and they cost at least Rp. 200,000 each, with the risk that the cargo would be damaged or the drivers physically abused. To "protect" truckers, the military and BRIMOB sometimes organized escorted convoys. Depending on the value of the cargo, participation in the convoy would cost between Rp.300,000 and Rp. 700,000 from Banda Aceh to the border with North Sumatra. Even when part of a convoy, truckers deemed it wise to throw out small incentives at each checkpoint (Rp.2000 to 5000). The new Police Chief for Aceh has stated that he will take strict action against any of his men that still collect illegal levies. However, many observers note the difficulty for security forces to curtail lucrative money-making opportunities.

Since the CoHA, the situation has improved. The number of checkpoints has gone down sharply, and

Table 5: Comparison of Economic Growth in Nanggroe Aceh Darussalam and Indonesia Growth in GDP (%) 1996 1997 1998 1999 2000 2001 2002

Aceh 7.69 5.28 -5.78 -1.33 0.47 1.58 3.01 (est)

Indonesia 7.64 4.70 -13.13 0.79 4.90 3.32 3.50(est)

Source: BAPPEDA NAD, 2002.

15

they are charging much less. The only area were the situation appears not to have changed is Aceh Timur. Each Banda Aceh - Medan trip now costs about Rp.400,000, according to local officials in Pidie.

There is still widespread evidence of other forms of direct extortion to enterprises. For example, a shrimp farmer with a turnover of Rp. 60 billion and 400 families as permanent staff closed his business because it became too risky to operate. There was constant extortion. Infrastructure was not safe, employees were not safe, equipment and produce were stolen, there were clashes preventing the farmers from collecting their shrimp, and there were too many roadblocks.

Security is also a problem for commerce at sea. The Jakarta Post of January 13, 2003 reports complaints from fisherfolk in North Sumatra that they are

subjected to extortion and piracy in Acehnese waters, typically costing up to Rp. 5 million per day.

Credit is Limited

Provincial and kabupaten Chambers of Commerce in Aceh identify the absence of credit as a major reason

for very low investment rates. Small businessmen who have been burned out can’t pay outstanding credit and can’t borrow to rebuild. New or revolving credit lines are reportedly impossible to obtain except for the very best, most secure businesses. As a result, many of the borrowers that can pay are not repaying on existing loans, preferring to preserve working capital when there is no assurance of another loan if capital is needed later.

Traders who continue to operate in the rural areas are almost always self-financed. Businessmen complain that loans are available mainly to civil servants and are used primarily for consumption. This picture is generally confirmed by banks in the province. One public bank with the largest rural coverage reports 21 percent growth in credit this year (to date), but the number of borrowers has declined by 2 percent. An important commercial bank in the province stated that

they are very selective in their lending and tend to focus on recruiting the best of existing businesses.

Restricted Access to Markets

Products like coffee are grown by smallholders in Aceh. They sell to roving middlemen. The farmers do

Box 1: The Impact of Conflict on Transportation in Aceh Medan is the central point for trade in Aceh, as consumer goods are distributed from there, most commodities are processed there, and all exports transit through Belawan port. Transportation is thus key to all aspects of consumption and production in Aceh. It was greatly affected by the general conflict and state of insecurity. • Trucking firms were spending an average of 60% of total cargo revenues at formal and informal check points. • From Aceh to Medan (608 km), there were 60 official check posts along the East Coast road, and 87 check

posts along the West Coast road. • Passage through each check post involved payments ranging from Rp 50,000 to Rp 2 million, depending on

the value of the cargo. Failure to pre-negotiate these amounts meant higher fees and added time to negotiate at each check post. Buses and bemos also had to pay at the check points, but a lower amount.

• Average cargo transport costs for the Aceh-Medan trip were Rp 250/kg, reportedly the highest land transport costs in Indonesia.

• NAD has a public rolling stock estimated at roughly 70,000 vehicles (including trucks, buses, bemos, etc.) although only an estimated 15% of those vehicles were on the road prior to CoHA. Many have been burned, but a large number were being warehoused both in Aceh province and in North Sumatra, waiting for safer times.

• Many interior areas suffering more persistent conflict may not have had any public transportation service available.

Sources: Organda and private sector interviews, February and November, 2002

16

not manage to make a decent profit because they lack access to markets, and the middlemen are able to control the prices. Moreover, the cost of transportation weighs heavily on the farmers’ profits. Bulky goods are of course more sensitive to the cost of transportation. Oil palm fruits are a good example: according to local businessmen, the price of a kilogram of fruit is Rp. 200 west of Lhokseumawe but goes up in price to Rp. 680 close to the border with North Sumatra.

The Private Sector’s Post-conflict Priorities When representatives of the private sector were asked during recent interviews what kind of assistance would be most effective for Aceh, they were remarkably thoughtful and generally consistent in their answers:

§ Provide infrastructure and security so the private sector can operate efficiently.

§ Re-establish a functioning legal system.

§ Monitor illegal rent-extractions that may not immediate disappear with the ceasefire.

§ De-politicize aid, and deliver it directly to the people.

§ Focus on technical assistance. It will be important to monitor “transaction costs of doing business” over the next few months. While recent observations suggest that the situation has dramatically improved as described above, the JSC has been receiving increasing numbers of reports of illegal levies. The reports may reflect greater willingness to report incidents since CoHA, rather than a higher incidence of extortion.

2.3 Public Resources, Spending and Planning

To better appreciate current public spending patterns and possible resource needs in Aceh, one needs to focus on the central government, the provincial government, and the province’s now 20 local governments – kabupaten and kotamadya – jointly, including resources provided by donors/multilaterals.

Such a consolidated picture incorporates three major

Central (Pusat)

Provincial Government

Local Governments

(20)

General Flows: Block Grant (DAU), Shared Revenues (SDA/STX) Earmarked Flows: Special Grant (DAK), Other (e.g., 2003 Wage Supplements)

DAK+Other

DAU/Shared Revenues

Figure 1: Principal Fiscal Flows in Aceh (Center, Provinces, and Local Governments)

APBD ABPDs

APBN

Legend:

Own Revenues

Own Revenues

Central Spending Provincial Spending Kabupaten/Kota Spending

17

public spending flows to Aceh: (a) expenditures by the provincial and local governments through the regional budgets (the APBDs); (b) expenditures by the national government (the APBN, and its routine “DIKs” and development “DIPs”, donor projects often playing an important part in the latter); and (c) donor/multilateral funding that does not flow through or enter into the government budget. Figure 1 illustrates the major revenue flows and ultimate spending by center and regional governments. Regional governments in Indonesia rely primarily on central transfers (World Bank 2002a,b). These include the general block grant (DAU), shared taxes (STX), and natural resource revenues (SDA). Other transfers such as the earmarked grants (DAK) for

reforestation, infrastructure, education and health remain small. Own revenues (PAD), for example taxes of restaurants and hotels, tend to be quite limited.

Figure 2 adds up these various revenue components for Aceh, and compares that sum to Indonesia’s 29 other provinces. In 2001, at least Rp. 4.4 trillion (USD 490 million), or Rp. 1.1 million per capita (USD 123), appears to have been available in Aceh for the provision of public services and investments through regional budgets and the part of the central development budget that we can attribute directly to the province.10

10 These estimates do not reflect any possible withholding.

Figure 2: Consolidated Public Resources at Provincial Level (Province, LG, Central Development)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

Province

Per

Cap

ita

Rp

s (2

001)

Central Govt Development expend.

Local Govt Central grantLocal govt tax share

Local Govt Natural Revenue Share

Local government own RevenueProvincial govt Central Grant

Provincial govt Tax Share

Provincial govt National Revenue ShareProvincial government own Revenues

18

According to this consolidated picture, Aceh trailed only East Kalimantan, Papua, and Riau, three other natural-resource-rich provinces, in terms of available funding per capita. This would suggest that public spending was already 2-3 times higher on a per capita basis than in many other provinces, although this higher figure clearly does not say much about the actual spending needs or efficiency. Special autonomy approved in 2001 has brought Aceh additional resources, especially at the provincial level.11

Regional Budgets (APBD)

Aceh is a strong beneficiary of natural resource revenue sharing (SDA), which accounted for 81 percent of its revenues. This means that on a per capita level, Aceh could and did plan to spend far more than most other provinces in Indonesia in 2002 (see Table 7).

The local (district) governments on average spent per at capita levels that were more comparable to those of local governments in the rest of Indonesia, and combined spent about as much as the province (see Table 8). However, the data suggests big differences across the 15 local governments already in existence in 2002. While many greatly exceeded the national per capita average, others were quite close to it.

The province, moreover, enjoys more discretion in its budgets due to a lower share of wages to total revenues (38 versus 72 percent for the average local government). The province allocated its extra resources across local government jurisdictions according to the implementation regulation (Qanun 4) passed by the Aceh DPRD in 2000.

Comprehensive central, provincial, and local government budgets for 2003 are not yet available.

11 Starting in 2002, Law 18/2001 (9th August) provides for Aceh’s Special Autonomy and higher revenue sharing. Aceh’s Special Autonomy Law gives it 55% of petroleum and 40% gas natural-resource taxes (rather than the standard Government Regulation 104/2000 (Article 12) of 15 % petroleum and 30% of gas). Law 18/2001 (Article 4.5) states that that this arrangement will be re -evaluated after eight years, i.e., in 2009. In addition, the Special Autonomy law stipulates that 30% of the transfers from the central government must be set aside for development expenditures in education.

The finalized 2003 central allocation figures suggest that Aceh will receive Rp 2.3 trillion (est. USD 260.3 million) in block grants transfers (DAU) in 2003, plus USD 33 million in other transfers. 12 With 7 percent of the national allocation of Rp 2.269 trillion, Aceh has already received relatively generous DAK allocations from the national government’s budget

program. The additional funds mandated in the 30

12 These include USD 18 million in the newly introduced DAK for infrastructure, health, and education, largely for facilities rehabilitation.

Table 7: Provincial (APBD) Budgets for FY 2002

(Rupiah, and percent where indicated) Per

Capita Revenue

Share Own Revs %

Share SDA %

Nanggroe Aceh Darussalam Province

716,651 4.4 81

National Average

189,122 28.8 10.3

Table 8: Local Government (APBD) Budgets for FY 2002

Per Capita Revenue

Share PAD %

Share SDA %

Kab. Aceh Barat 638,997 1.74 22.41 Kab. Aceh Besar 777,360 1.78 19.89 Kab. Aceh Selatan 792,648 1.73 27.79 Kab. Aceh Singkil - - - Kab. Aceh Tengah 820,891 2.33 11.38 Kab. Aceh Tenggara - - - Kab. Aceh Timur - - - Kab. Aceh Utara 1,292,791 0.71 33.23 Kab. Bireuen - - - Kab. Pidie 628,663 1.25 16.57 Kab. Simeuleu - - - Kota Banda Aceh 884,974 2.87 18.78 Kota Sabang (2001 data) 4,876,106 1.34 22.85 Kota Langsa 609,855 2.32 13.10 Kota Loksumawe - - - National LG Average 657,285 5.98 5.07

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percent education set-aside under Special Autonomy means that ample funds should be available to rehabilitate schools damaged through conflict or general depreciation. 13

Actual data for the natural resource transfers for 2003 are not yet available, but revenue transfers – mostly from gas – amounted to an estimated 2.2 trillion (USD 241 million) in 2002. Assuming that natural resource revenues will stay at least the same next year, this suggest that at least 535.5 million USD (about 133 USD per capita will be available through the regional budgets in Aceh next year, not including other own source revenues (see Table 9).

New to 2003 is also the creation of five new local governments, increasing the number from 15 to 20 (see Annex 2: nationally the total number of local governments went from 348 to 370). This expansion will also require resources to establish the new local governments that have been split from existing units. Further work will also be needed to determine the capacity and operating cost of this increased number of local governments.

Natural resource transfers (SDA) are potentially a much needed boon for Aceh’s development prospects. But these flows will likely not last forever. Taking the province – which draws heavily on natural

13 Much of Aceh’s basic school infrastructure was built in the 1970s under the Inpres, has reached the end of its lifespan and needs to be replaced.

revenue sharing – and local governments together in Aceh, about one third of overall revenues were derived from natural resource transfers (SDA) in 2001. Aceh’s natural resource sharing revenues are anticipated to decline markedly in five years as oil and gas production declines. Although SDA revenue streams are anticipated to decline, these will not completely disappear in the next ten years. By volume, production levels may drop by more than half in the next decade (Mann, Arthur J. 2001b).14 This would impact primarily the province. Assuming that Aceh did loose this one third of decentralization/special autonomy SDA revenues, this would at present still place Aceh’s overall per capita provincial resource availability in 12th place nationally (see Figure 2).

Central Expenditures (APBN)

Nationally, the central government continues to spend more than the regions for development, even in such areas as education, health, and infrastructure. The 2002 development budget projected spending 53.3 trillion on development across the whole country. The central government’s development budget distinguishes between own source (rupiah murni) and donor funded expenditures. Just under half has historically been donor funded.

In 2001, we could attribute about Rp 0.97 trillion (est. USD 107 million) of direct central government expenditure realization to Aceh (WBOJ 2002). If we assume that the center spent its development expenditures in proportion to population (i.e., for Aceh’s 4 million relative to the national population), we would expect Aceh to have received 1.03 trillion in 2002. Given the priority that is often given to Aceh in government documents, we would have expected the proportional allocations to be higher (Government of Indonesia 2002) rather than lower. Further work will be needed to highlight the actual level of resources the center is allocating to Aceh.

While allocations for Aceh may be high, realized expenditures have typically lagged behind planned allocations in past years and tend to be highly 14 Until April 2000, six LNG trains operated in Aceh. From the four remaining trains, two are anticipated to close between 2005-2007, with only one train remaining in operation from 2008-2014.

Table 9: Projected Regional Government Revenues

Local Governments

Provincial Government Total

(millions USD)

(millions USD)

(millions USD)

DAU 2003 241.1 19.2 260.3 DAK/Other Special Transfers 2003 32.6 1.4 33.9 Revenue Sharing (SDA/STX 2002) 134.8 106.3 241.1 TOTAL TRANSFERS 408.5 126.8 535.3

Source: Ministry of Finance, see also Annex 2

20

compressed in the la tter part of the year -- even in comparison with other areas of the country. By October 15, 2002, only 46 percent of overall national central development allocations had been realized. The government was still projecting realizing Rp. 47.5 trillion (90.1 percent). Local government expenditures have been even more problematic, with reportedly less than 30 percent of the APBD having been disbursed by the fourth week of November 2002. Anecdotal evidence suggests that the problem of realized expenditures may be especially chronic in Aceh, particularly for donor funded activities (Mann, Arthur J. 2001a). Whereas this is an overall problem for development spending in Aceh, in the current circumstance it may also be an opportunity. The emphasis in 2003 – where initial budget plans are for Rp 54.5 trillion -- may therefore not have to be in increasing budgetary allocations for Aceh, but ensuring that those allocations are actually implemented effectively.

Underspending can be partly explained by the unclear rules regarding budget allocations to local governments. Law 18/2001 on Special Autonomy not only granted Aceh significant additional levels of revenue sharing, but significantly enhanced the role of the province and the governor in Aceh. This contrasts with decentralization Law 22/1999, which places primary resources and authority in the hands of local governments. Much ambiguity remains, and understandably many local governments in Aceh lean towards the interpretation of Law 22 more favorable to them. This lack of clarity, along with lack of implementing provincial regulations, could undermine the effective use of resources. At the same time, more clarity needs to be established as to the level of central government (ABPN) resources that are implemented in the province.

The distribution of revenues across Aceh’s local governments is regulated by Qanun 4 of February 2002. The Qanun states that 40 percent goes to the province, 25 percent goes to the producing district, and the remaining 35 percent is distributed to the other districts based a formula involving population and land area. Further analysis will need to determine the degree to which this promotes fiscal equalization across local governments in Aceh.

The number of local governments in Aceh has doubled during the few years, increasing from 10 to

the present 20. This not only presents fixed costs in terms of replicating local bureaucracies, but also concerns about a further fragmenting of local capacities for implementation. Absorption capacity in various sectors could present serious problems for implementation, and some regions such as Aceh Tenggara were reported to be especially weak. Although the province could act to backstop smaller or weaker local governments under Special Autonomy, there were some indications that the gulf between provincial and local governments in Aceh was widening rather than closing. Measures for better planning, coordination and responsibility assignments will therefore be critical elements to the effective spending of fiscal resources.

Also, the regional governments will have to be careful to engage in effective medium-term civil service management. Recent fiscal windfalls in education will apparently be used to supplement for example teachers salaries for 2003. Further work will have to be done to evaluate the effectiveness and fiscal sustainability of such measures. Efforts by the Bappeda and the University of Syiah to engage in a broader process of Aceh 2020 (“Visi Aceh 2020”) with broader parts of civil society are to be encouraged.

Many of the institutional features, and weaknesses, of planning and budgeting in the rest of Indonesia are also evident in Aceh. Uncertainties surrounding Special Autonomy potentially introduce additional challenges in the province. The province’s intention to implement Islamic law may pose still other challenges.

Since the province and local governments rely heavily on natural resource transfers, delays in setting these allocations have delayed budget implementation for 2003. Combined efforts will have to be made to anticipate allocations earlier and allow for more flexible implementation, especially to yield fast and effective results from available budgets in Aceh in the upcoming year. The Governor has established a “Tim Migas” to liaise with the center on the timing and calculation of transfer.

Provincial planning priorities are set out in provincial Qanuns (i.e., local regulations/Perdas elsewhere) 1-3, 2002 (i.e., the Propeda, Renstra, Repetadas). The regional development program (Program

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Pembangunan Daerah (Propeda)) is a broad statement of provincial government objective and includes a statement of vision and mission. Rencana Strategis (Renstra), a strategic plan with a three-year time horizon, is aimed at establishing accountability for the heads of the region and the heads of dinas/badan. Based on Renstra, Rencana Pembangunan Tahunan Daerah (Repetada), an annual plan, is developed. The Repetada is the only planning document that connects with the local budget (APBD).

A review of these instruments suggests that they do not have clear linkages at the provincial level, and that linkages are even weaker with the corresponding instruments at the local level. Moreover, the lack of clear performance indicators makes it difficult for stakeholders to measure government’s performance on providing public services. NGOs expressed the view to the multi-donor mission that there was no transparency and involvement of the civil society and that it was even difficult to get access to the documents

The current Rakorbang (regional development planning and consultation) did not appear to adequately respond to the demands from the community and other stakeholders. Local governments complained that they were not sufficiently involved in planning and implementation processes by the provincial level, e.g., in discussions surrounding national roads. For example, some local officials were concerned that province appeared focused on large, prestigious new projects rather than on rebuilding and rehabilitating the facilities that have been damaged or destroyed by the conflict.

Most of the tender processes do not appear to follow transparent procedures. Information on public works projects was not routinely being disclosed to the public, for example on signboards at project sites. There is a general perception that management of the sectors remains closed, and that projects are controlled by vested interests (e.g., Pemda and contractors).

The local government internal auditor (Bawasda) is responsible for controlling local government expenditures. However, limited audit scope, limited staff capacity, and restrictions on field visits because of the conflict have constrained its performance. There is a need to integrate the control function with

other supervision agencies (BPK and BPKP) and to improve capacity in Bawasda.

Lack of transparency and consultation at this stage are unfortunate, because they are among the main avenues through which government can win back the trust of civil society. One “quick-fix” approach would be for the government to ask third parties such as NGOs, the new media, the university, to participate in supervision and monitoring of on-going program to ensure effective implementation.

2.4 Governance Issues

Aceh faces many of the same characteristics and challenges of regional government and development evident across Indonesia after decentralization. Responsibilities over resources and service delivery increased signif icantly for provincial and local governments (World Bank, 2002). While decentralization offers the opportunity for more responsive government, this can by no means be taken for granted. Lack of capacity and limited accountability on the part of regional governments can undermine the prospects of enhanced public services to communities and of a return of investment for broad-based growth.

The post-conflict and special autonomy situation gives additional, unique dimensions to restoring public services and productive investment in Aceh. To be sure, although the conflict has touched all of Aceh, there are considerable differences across the province.15 However, the legacies of conflict, exclusion and marginalization weigh on many parts of society. First, the need to rebuild trust is great: trust between the government forces and GAM, between the public and government in general, and between levels of government. Distrust is a barrier to democratic participation.

Second, there is an increasing pressure on the provincial government to act quickly to meet the public’s overwhelming expectation of fast and concrete economic development.

15 The conflict was initially most pronounced in the eastern regions of Pidie, Biruen, North Aceh, and Eastern Aceh.

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In the post conflict context in Aceh, good governance and security are widely seen by all consulted stakeholders16 as critical preconditions for long-term development, economic recovery and reconciliation. Insecurity caused by, for example, increased criminality or illegal taxation is indicated as a key factor limiting the successful restart of economic activities and undermining the credibility of the institutions responsible for delivering services, administering justice and protecting the population. Furthermore, it is perceived as weakening trust, confidence building and reconciliation efforts.

Discussions during the multi-donor mission, particularly with civil society organizations, highlighted the importance of increased participation and consultation in Aceh’s reconstruction and the building of democratic processes in the province. A number of key priorities were put forward:

§ ensuring broad participation of civil society actors in the All Inclusive Dialogue and ensuring the dialogue covers all aspects of Law 18;

§ improving consultation of communities in service delivery and program design;

§ ensuring that women’s contribution as peace builders and peace-makers are effectively built upon and their perspectives sought;

§ supporting local capacities for promoting peace and reconciliation and for finding innovative solutions.

§ Improving transparency and accountability regarding the allocation of development resources

Special Autonomy and Governance

The Special Autonomy Law of Nanggroe Aceh Darussalam province (UU NAD No.18/2001) was enacted in August 2001 by the national parliament (DPR). While this law gives enormous opportunities for the future development of Aceh, there are three critical challenges that must be overcome to achieve full implementation of the law: (a) lack of implementing regulations (e.g., for direct elections), 16 This issue was raised as a priority by almost all interviewees including: governance officials, members of law enforcement agencies, international and national NGOs alike, and field members of the JSC.

(b) uncertainty regarding the respective roles of the governor and regents/mayors, and (c) no clarity on accommodating political aspirations, including those of GAM, into the formal and peaceful political process.

The first obstacle to Special Autonomy is a lack of provincial regulations to implement the law. UU NAD NO. 18/2001 can only begin to have its full effect after enactment of a multiplicity of provincial regulations (called Qanuns in Aceh, Perdas in the rest of Indonesia). The law mandates direct popular elections of the Governor, Vice-Governor , regents and mayors and vice-regents and mayors, to establish a democratic government in Aceh, with legitimate authorities at both provincial and local government levels. About half of Aceh’s regional heads are up for election in the next year, and there has been much political pressure for the implementation of direct elections (“pilsung” or pilihan langsung). However, the Qanun to define details of the direct election has not yet been passed by the provincial parliament (DPRD).

The Quanun has been drafted, by 33 members of the DPRD, with assistance from a Jakarta-based NGO, Center for Electoral Reform (CETRO), and the U.S.-based International Republican Institute (IRI). DPRD NAD has just accepted the draft for discussions, which could be finished in March 2003. It is not clear whether the draft has been subjected to adequate public consultation. Elections could potentially begin in 2003, but careful planning of the election process will be critical for its success.

The second obstacle regarding the special autonomy package is the uncertainty over the roles of the governor and the regents. The existing autonomy law (UU No. 22/1999) gives principal authority to regents and mayors in managing financial and administrative affairs, whereas the UU NAD No. 18/2001 gives some of this power to the governor. The dual authority created by the two laws is creating confusion among local and provincial authorities as to which law should be respected. One example is a complaint from a Bupati that the provinc ial government intervened to deny a planned purchase of school buses for his regency. His opinion was that the purchase of the school buses is the right of regent based on the provisions of the UU No. 22/1999. This

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uncertainty needs to be resolved through consultation leading to enactment of appropriate qanuns.

The third challenge is to find ways to accommodate regional aspirations such as those of GAM in the formal political system. The law on political party amended by the DPR in December 2002 does not recognize a regional party as a contestant in the 2004 general election. Thus, the fact that GAM’s support base is in Aceh limits its opportunity to form a political party and contest an election. It is difficult to imagine that GAM would join existing national parties. UU NAD No.18/2001 does not address this issue either.

The first obstacle can be resolved at the provincial level, while resolving the other two needs action by the central government. Provincial leaders in both the executive and legislative branches must therefore work closely with the central government and the national parliament. Transparency is essential to avoid both the reality and the appearance of closed decision-making by political elites.

Judicial Reform

The Special Autonomy Law and the CoHA give the province special authority and responsibilities in justice and law enforcement. The province thus needs to take the lead in reforming and strengthening the judicial system and the police. Both institutions present particula r challenges, and as police and judicial reform have proven difficult at the national level, the risks and opportunities provided by the special situation in Aceh need to be better assessed.

After 26 years of protracted war, the formal judicial system has collapsed. Eighteen permanent courts used to operate in Aceh, but now they operate from only six locations, exacerbating the burden on those six and reducing access to the system for the majority of people. Access to courts is already an issue in Indonesia, and the current physical distances are making the formal justice system even less accessible. As the conflict has broken down trust within society in general, suspicion about court decisions and perceptions of widespread corruption have further decreased the credibility and effectiveness of the

judicial system. In addition, jurisprudence and judicial procedures are underdeveloped, the safety of judges, staff, witnesses, evidence and suspects is continuously at risk (judges and administrative staff are being threatened and are afraid to continue their duties). Capacity is very uneven throughout the province. While Law 18 stipulates the creation of a Syariat Court System, the provincial regulations are still to be developed and approved. Adat courts are the most accessible mechanism for ordinary people. In Aceh 90 percent of the disputes are handled through Adat courts. In the current post conflict environment, adat law could also be a powerful tool for reconciliation and conflict resolution. Regrettably, adat judges (village leaders) are no longer elected, are seen as vulnerable to abuse by the parties to the conflict and, as lacking neutrality and sufficient knowledge.

Law Enforcement

With respect to the police, civil oversight by the provincial governor as stipulated in Law 18 will have to be further defined in a provincial police law. The Qanun has been drafted but still needs to be disclosed to the public, discussed and approved including a time-table for implementation. A key challenge is to counter the existing lack of trust, perceived lack of accountability and abuse of power by law enforcement institutions and mechanisms. Success in this would engender the respect for the law that is currently weak in many parts of Indonesia. The rapid integration of about 4,000 BRIMOB into the Uniformed Police and the gradual recruitment of Acehnese into the forces (possibly including former GAM combatants) put pressure on the system to enhance and extend capacity (including training), to ensure that officers have the ability to undertake their duties professionally.

2.5 Infrastructure Issues

Rehabilitation and reconstruction of infrastructure that was damaged or that deteriorated though lack of maintenance as a result of the conflict is important,

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especially in the short run. But Aceh’s infrastructure has not been excessively ravaged by the conflict.

Electric Power

Power shortages were considered to be acute problems by many stakeholders contacted during the multi-donor mission. Electric services in Aceh were poor even prior to the conflict, with insufficient transmission and power generation in place. Supply is often intermittent across Aceh, a condition that creates disruptions in many sectors, including in education, small and medium industries, and government offices. One response for those who can afford it has been to buy small generators, but this is neither efficient, environmentally desirable, nor practical for lower-income families.

The maintenance of PLN’s equipment contributes to the problem; it is substandard in part due to constrained budgets. The tariff for electricity in Aceh is only Rp. 350/Kwh, while the break-even point is Rp 700/Kwh at the moment. The tariff levels have not been changed for years.

Short-term actions to ameliorate the present power shortage have to involve operational measures by PLN, as implementation of any new power generation capacity will require at least 2-4 years. Although Aceh is interconnected to the North Sumatra grid, spare capacity is not available in PLN-owned power plants there. One promising possibility is for PLN to buy surplus power from captive power plants owned by large industrial consumers (fertilizer and petrochemical plants). The installed power generation capacity of such plants in Aceh is 485 megawatts (MW), out of which 47 MW is already connected to the PLN grid. If the government finds this approach suitable, commercial terms will need to be negotiated by PLN with the owners to make surplus power available when the PLN supply is insufficient. The Peusangan hydropower project is an integral part of the least-cost development plan to meet the power demand in Aceh and North Sumatra. It utilizes the existing lake and regulating reservoir, which obviates the need for major civil works and hence the environmental and social impacts are minimal. The design and detailed engineering of the project were prepared under an ADB loan approved in July 1991.

The project financing was included in the ADB-supported Power Development and Energy Enhancement Project approved in October 1995, and JBIC Loan IP-441 signed in December 1995. The consulting services for supervising project implementation ($21 million) and civil works ($68 million) will be funded under the JBIC loan, and metal works ($13 million), electrical works ($40 million), and transmission line for power evacuation ($9 million) will be funded under the ADB loan. The tendering process for the civil works had to be suspended when prospective contractors withdrew because of security concerns. A joint JBIC-ADB staff field mission is tentatively planned in the second quarter of 2003 to evaluate the possibility of restarting the project. The project cannot alleviate the present power shortage problem in Aceh as its benefits will be available only after 5-6 years. There are three proposals for privately-owned power plants in North Sumatra, namely Asahan I hydropower plant (180 MW), Suralla geothermal power plant (330 MW), and Sibayak coal fired power plant (120 MW). The power purchase agreements for the three projects were signed prior to the 1997 crisis but project implementation was initially postponed in by Presidential Decree 39 of September 1997, and later approved to continue by Presidential Decree 15 in March 2002. Renegotiations have been held during the past 2 years with the project developers to restart the project implementation under revised terms. A suitable framework could be developed to expedite the renegotiations and project implementation with specific allocation of power for Aceh and the responsibility of power purchase being shared between PLN and the Aceh provincial government. Developing this type of a new approach will require time and resources, and its benefits will be available for another 3 to 5 years. An ADB-funded TA is presently under implementation to develop a new framework for private sector participation in power generation projects outside Java-Bali, and its recommendations will be useful for finalizing this approach (recommendations expected by mid-2003).

Another possibility is for PLN to procure diesel generators or open-cycle turbines that can be installed in Aceh's major load centers in a relatively shorter period of 1-2 years. However, such power generation

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will have to be based on fossil fuel so will have adverse environmental impacts, and the cost of power will be higher. That approach would require Aceh to substantially increase the electricity tariff in the province, which will only be possible once the government regulations following the new Electricity Law 20 of September 2002 are issued (expected by end 2003). PLN will also require assistance in capital investment as the average national tariff is presently insufficient to provide additional resources (the tariff level will be adequate 2005 onwards).

Housing

Aceh faces the challenge of rehabilitating approximately 13,501 houses estimated to have been destroyed in the conflict, according to the provincial Department of Social Welfare. The provincial Department of Urban Affairs and Settlements has an immediate plan to rebuild and rehabilitate the houses that have been destroyed by the conflict throughout the province. The Department allocated resources and started implementing rehabilitation for 3,135 houses. However, these is some debate about how the entire task can best be financed and carried out. As is the case with schools, the communities themselves should be looked on as excellent sources of labor and ingenuity in this effort.

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References and Data Sources

References Badan Pusat Statistik and Badan Perencanaan

Pembangunan Daerau NAD, 2002. Aceh Dalam Angka (Aceh in Figures). Jakarta..

BapPeda NAD, 2002, Economic Reconstruction and Reconciliation and Society Building Province of Nanggrow Aceh Darussalam,

Dinas Perkotaan dan Permukiman, 2002, Usulan Program:Dinas Perkotaan dan Permukiman Propinsi NAD dalm Pertemuan Dengan Negara Donor di TokyoIchsan, Chairul, Islahuddin, Abd.

EN.REFLIST

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Data sources

The most recent of the Susenas household survey was conducted in 1999 by the bureau of statistics (BPS). For more recent data we rely on a poverty survey conducted by the University of Syiah Kuala17 (Poverty Survey) and a facility survey conducted by KDP facilitators (KDP survey).

The 1999 Susenas provides statistically sound estimates of poverty, and other social welfare indicators. The data also allow for a comparison between Aceh and the rest of the country. BPS ceased the household survey after 1999 because of safety concerns. When presenting tabulations by welfare status we distinguish between poor, middle, and rich households. For the analysis based on the Susenas 1999 this classification is based on the per capita household consumption of the household. The first quintile is categorized as poor, the third as middle and the fifth as rich.

The Poverty Survey was conducted by students of the university during their summer break in August 2002. Basic socio-economic information was collected from households, health and education facilities and a community questionnaire for 2 villages in almost all kecamatans in Aceh. Students were asked to collect information from 2 poor households, 1 middle, and 1 rich households. Because the classification is subjective, and probably depends on how wealthy the

17 Financial assistance was provided by the Office of Transition Initiatives and technical assistance by the World Bank.

area is, the categorization of households in poor, middle and rich it is based on an indicator based on household assets and consumption. The sampling however, remains non-random. If we compare characteristics of time-invariant variables across the three groups we find that the poor generally have rather similar characteristics. The housing characteristics indicate that the rich in the Poverty Survey represent a higher income bracket than the rich in the Susenas household survey.

The KDP survey was fielded in September 2002 and collected information on prices, wages, and health and education service delivery from 900 kecamatans in which KDP was operating throughout the country. The choice of the village where the facilitator collected the data was not specified. The purpose of the survey was to establish a mechanism that could deliver up to date information on the situation in the social sectors by using existing project reporting mechanisms.

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Annex 1. Fiscal Flows to Aceh’s Regional Governments, 2002-2003 Central Transfers Other Allocations FY 2002 Revenue Sharing

DAU 2002 Final

DAU TA 2003

DAU 2003 Adjustment

DAU 2003 Final DAK 2003

Wage Hike Compensation 2003

Teacher Top Up 2003 STX SDA (Oil)

SDA (Gas)

SDA (Other)

(billions Rp) (billions Rp) (billions Rp) (billions Rp) (billions Rp) (billions Rp) (billions Rp) (billions Rp) (billions Rp) (billions Rp) (billions Rp)

1Kab. Aceh Barat 174.8 76.3 0.0 76.3 9.2 4.7 2.1 6.6 7.7 1.2 0.22Kab. Aceh Besar 167.0 192.2 0.0 192.2 7.0 12.7 3.3 5.0 7.7 1.2 0.23Kab. Aceh Selatan 137.5 114.3 0.0 114.3 10.9 6.7 1.5 4.2 7.7 1.2 0.24Kab. Aceh Singkil 101.5 93.3 8.3 101.5 3.6 1.6 0.6 4.8 7.7 1.2 0.25Kab. Aceh Tengah 146.1 149.7 0.0 149.7 12.5 7.4 2.5 4.9 7.7 1.2 0.26Kab. Aceh Tenggara 130.6 89.1 0.0 89.1 10.2 4.0 1.2 5.4 7.7 1.2 0.27Kab. Aceh Timur 180.1 139.0 0.0 139.0 8.4 8.2 2.5 15.0 21.2 1.6 0.28Kab. Aceh Utara 199.9 149.1 50.8 199.9 4.4 9.4 2.9 24.4 94.8 15.7 0.29Kab. Bireuen 138.9 154.0 0.0 154.0 4.8 8.5 3.2 7.7 7.7 1.2 0.2

10Kab. Pidie 233.0 221.8 11.2 233.0 8.7 12.4 3.9 5.5 7.7 1.2 0.211Kab. Simeuleu 87.3 79.7 7.6 87.3 10.2 1.4 0.6 4.7 7.7 1.2 0.212Kota Banda Aceh 138.0 134.5 3.5 138.0 8.4 7.8 2.7 7.7 7.7 1.2 0.213Kota Sabang 79.9 77.8 2.1 79.9 9.6 1.8 0.3 4.6 7.7 1.2 0.214Kota Langsa 57.5 62.6 0.0 62.6 3.4 1.0 0.4 0.0 7.7 1.2 0.215Kota Loksumawe 62.7 87.3 0.0 87.3 3.7 2.8 1.0 0.0 7.7 1.2 0.216Kab. Aceh Jaya 0.0 41.9 0.0 41.9 8.6 2.8 0.8 0.0 631.4 228.8 1.217Kab. Nagan Raya 0.0 64.9 0.0 64.9 8.8 1.5 0.4 - - - - 18Kab. Aceh Barat Daya 0.0 47.6 0.0 47.6 8.7 2.3 0.5 - - - - 19Kab. Gayo Lues 0.0 58.9 0.0 58.9 8.2 1.9 0.6 - - - - 20Kab. Aceh Tamiang 0.0 52.5 0.0 52.5 9.1 2.9 0.9 - - - -

Local Governments (Total) 2,034.7 2,086.3 83.5 2,169.8 158.5 101.9 32.1 100.3 847.9 261.1 4.0 Province Aceh 172.4 76.1 96.3 172.4 2.5 9.7 0.0 32.0 54.1 8.1 1.2 Province Aceh (Special SDA) 0.0 631.4 228.8 1.2 Total (Province + LGs) 2,207.1 2,162.5 179.8 2,342.3 161.0 111.6 32.1 132.3 1,533.4 497.9 6.4 Local Governments (est. million USD) 226.1 231.8 9.3 241.1 17.7 11.3 3.6 11.1 94.2 29.0 0.4 Province (est. million USD) 19.2 8.5 10.7 19.2 0.3 1.1 0.0 3.6 76.2 26.3 0.3 Total Aceh (Province + LGs, est. million USD) 245.2 240.3 20.0 260.3 18.0 12.4 3.6 14.7 170.4 55.3 0.7 Source: Ministry of Finance. Rate used is Rps 9,000/USD

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ANNEX 2

Monitoring of the Reconstruction and Development Activities in Aceh

Introduction and Objectives

A monitoring system of reconstruction activities and development programs in Aceh is be key to ensure that timely support is provided to the Acehnese population to reestablish a normal livelihood. The monitoring system is intended as a mechanism to oversee the implementation of activities and outcomes of development programs (governmental and donors programs alike) with the following specific objectives:

1. To gather data on governmental plans and other actors (bilateral and multilateral donors, NGOs, etc.) and disseminate it so as to keep the Acehnese population informed of existing and planned initiatives

2. To document progress in the implementation of reconstruction and development activities and detect delays or irregularities in the implementation process

3. To disseminate information on the overall progress of implementation of development program so as the Acehnese population is informed of on-going activities

4. To provide feedback to government and donors on progress in implementation of development program, gaps, delays so as the necessary corrective measures are taken by the concerned institutions

5. To direct any special concerns and indications of irregularities to the appropriate government institutions The monitoring of reconstruction activities and development programs in Aceh will be an on-going process that would tentatively last for a initial period of eighteen months.

Stakeholders Consultations

The mission held discussions with local populations in the rural areas, visited sites where destruction was inflicted by the conflict, met with government officials in Kabupaten Pidie and in Banda Aceh. In addition, the mission met twice with the Forum Aceh LSM to discuss the main characteristics of a monitoring system for reconstruction activities and development programs, as described in the next section. The Forum Aceh LSM is composed of 104 local NGOs working in different themes such as economic and social projects, legal rights, women’s activities and many others. The mission also met with the Henri Dunant Center (HDC), third party mediator in the peace process.

Monitoring System

The monitoring of reconstruction and development activities is expected to rely on local NGOs capacity to follow up on government’s and donors’ development activities in Aceh. NGOs involved in the monitoring process would create a network or secretariat that would compile and consolidate the results of monitoring process in selected priority sectors (health, education, economic activities, vulnerable groups, etc.). Local NGOs involved in the monitoring process would rely on their links to local community groups to access information and would regularly visit sites of reconstruction and development projects to inform their evaluation. Close collaboration with community groups and field presence are key elements for a successful

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monitoring system. In the interest of having a stronger monitoring process, close collaboration between the NGOs monitoring network (or secretariat) and governmental institutions and donors would also be pursued. The NGOs monitoring network (or secretariat) is expected to create mechanisms for dissemination of their reports and overall information in Aceh and in the national scene. Effective ways of disseminating information will be used including those reaching local communities, the Acehnese population in the urban areas, and the overall Indonesian population. Coalitions with national NGOs and national media would provide the venue for disseminating the results of monitoring. Close collaboration with governmental institutions and donors would also support the solution of potential irregularities in the different programs.

Additional Remarks

The creation of a monitoring network is a new initiative in Aceh and, therefore, local NGOs will need support to strengthen their capacity to successfully undertake the task. National NGOs and other national institutions would be a potential tool to provide training and technical support to the Acehnese NGOs involved in the monitoring system. Methodologies for community monitoring, communication and advocacy skills and interests based negotiation are potential areas of capacity building needs for the local NGOs. The estimated cost to get the monitoring network into operation and sustain it for 18 months would be approximately US $ 600,000.

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ANNEX 3

Identification of Activities to Expand the Community Recovery Programme

in Nanggroe Aceh Darussalam CRP currently maintains a regional office in Banda Aceh to coordinate program activities at the provincial and district levels. The provincial office supports liaison offices in four districts (Aceh Tenggara, Aceh Barat, Aceh Timur and Aceh Utara). Through this mechanism, CRP manages grant activities in cooperation with local civil society organizations (such as Aceh NGO Forum, WALHI, NGO forums for Gender Issues and Human Rights). CRP has supported a total of 63 grants to civil society organizations in Aceh since it launched operations there in 1999. A total of 35 of these grants have been to local NGOs and 28 have been direct to community-based organizations. The grantees are located in all districts of the province. The total funding committed to these grants is USD 622,000, of which USD 521,898 has been disbursed. The current programme has reached an estimated 10,000 poor households.

Future CRP Activities in Nanggroe Aceh Darussalam:

CRP plans to expand its programme by focusing on two inter-linked initiatives to address the special needs of the poor in the province:

Grants to Local NGOs/CBOs to Reduce the Incidence of Poverty.

CRP proposes to expand the existing programme of small grants (average size proposed to be Rp. 200,000,000) to local NGOs and community-based organizations (CBOs).. It is planned that a programme of 260 small grants will be phased over a three year period (60 grants will be implemented during 2003 and 100/year during 2004 and 2005). Priority will be given to scaling up of existing projects and to development of new projects in the peace zones to be established under the Cessation of Hostilities Agreement. Special attention would be given to those rural areas which have been the center of conflict in the past. All grants would be implemented so as to provide support for activities which:

• Empower the poor and their communities to further help themselves;

• Improve the access of the poor to formal credit and other resources to further improve their levels of income and welfare;

• Compliment and do not replicate other initiatives;

• Provide equal opportunities for assistance irrespective of race, religion, gender or political party; and

• Are cost-effective and likely to yield sustainable benefits.

Funding Requirements/Mechanisms:

As detailed in the attached Table 1, it is estimated that a total of USD 4,345,000 will be required to support this programme during 2003 to 2005. A total of USD 1,473,000. will be required to support implementation of the programme during 2003; USD 1,377,000 in 2004; and USD 1,494,000. in 2005. All funding would be channeled through the CRP Trust Fund and administered by the UNDP. Grant funds to local NGOs and CBOs would be transferred directly by UNDP to beneficiary groups based on administrative procedures established in agreements between CRP and UNDP. Technical assistance to support programme implementation would be provided by UNDP in cooperation with CRP.

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Table 1. Preliminary Estimated Cost to Support CRP Activities in Aceh during 2003 to 2005

US Dollars/Year

No. Unit Cost (Rp.) 2003 2004 2005

Total (USD) % of Total Costs

1. Grants to Local NGOs/CBOs 8.600 Area Based Grants Aceh Besar 2.300.000.000 267.442 267.442 Aceh Barat 4.000.000.000 465.116 465.116 Aceh Tenggara 1.400.000.000 162.791 162.791 5 additional Districts to be determined 2.000.000.000/district 581.395 581.395 1.162.791 Small Grants ‘Regular’ Program 25 grants 100.000.000/grant 290.698 290.698 45 grants 100.000.000/grant 523.256 523.256 55 grants 100.000.000/grant 639.535 639.535 Sub-Total Grants 1.186.047 1.104.651 1.220.930 3.511.628 80,8%

2. Strengthening Capacity of Local Society Organizations

- Workshops Provinces 2 x year 75.000.000/workshop 17.442 17.442 17.442 52.326 Districts 9 x 2 x year 25.000.000/workshop 52.326 52.326 52.326 156.977 - Training 430.000.000/year 50.000 50.000 50.000 150.000

Sub-Total Grants 119.767 119.767 119.767 359.302 8,3%

3. Support for Programme - CRP Staff Costs 10 individuals 40.000.000/staff/year 46.512 46.512 46.512 139.535 - Office Operation Costs 250.000.000/year 29.070 29.070 29.070 87.209 - Central Office Support 250.000.000/year 29.070 29.070 29.070 87.209 - Transportation Costs 200.000.000/year 23.256 23.256 23.256 69.767 - Vehicles (Motorcycles) 8 Units 15.000.000/unit 13.953 13.953

Sub-Total Support for Programme 141.860 127.907 127.907 397.674 9,2%

4. Technical Assistance Short Term National (UNDP) 15 months USD 1,500 /month 7.500 7.500 7.500 22.500 Short Term International (UNDP) 6 months USD 9,000 /month 18.000 18.000 18.000 54.000 Sub-Total Technical Assistance 25.500 25.500 25.500 76.500 1,8% Total 1.473.174 1.377.826 1.494.105 4.345.105 100,0%

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ANNEX 4

Description of the Kecamatan Development Project

Overview and current status -- The Kecamatan Development Program (KDP) is a government of Indonesia effort to alleviate poverty in rural areas and to improve local governance. KDP provides block grants of Rp. 500 million to 1,000 million (approx. US$55,000-110,000) per year to the poorest subdistricts and villages in Indonesia for small-scale, low technology infrastructure, social, and economic activities. Approximately 65%-70% of KDP block grants get spent on village labor, with the remainder going to basic materials such as cement, pipe, etc.

KDP emphasizes core principles of community participation in all stages of design and management, transparency, competition for funds, open menus, and sustainability. All KDP activities aim to allow villagers to make their own choices about the kind of projects that they need and want. Facilitated by social and technical specialists who live in the project districts and villages, KDP also provides a non-violent forum to mediate different interests and reach a broad consensus on community priorities. All KDP documents are public, and the project is monitored by independent NGOs and journalists who publish their reports with no prior review. In Aceh, KDP has functioned in without any long interruptions since it began in 1999. In 2002 the project operated in 7 districts, 63 subdistricts and some 1,234 villages.. However, conflict did affect the project’s operation in a number of ways: security concerns meant that meetings are usually held in the day rather than at night, after work, as in most other areas; villagers did not opt for economic loans because of fear to leave cash n any public place and because conditions did not ensure a stable enough environment to ensure a reasonable chance of success, and so on. For 2003, the project will expand to 8 districts and it will cover 2,000 villages. In addition, all eight districts are adding funds of their own, sufficient to cover 700 additional villages. Three hundred facilitators (300) have been trained and are currently being deployed across Aceh. Expansion proposal – KDP can be readily scaled up to cover the 13 main districts. This would require adding 61 kecamatans, which would include an additional 1,477 villages and a population of an additional 1.0 million villagers. Total costs of the additional amount would be approximately $16.5 million. Eighty-five percent of this amount would go to the village block grants, while the remaining 15% covers the cost of extra engineers and facilitators, independent monitoring, and fast-track training. A proposed timetable would deploy the first wave of 300 subdistrict facilitators to the villages by mid-February. A second round to cover the expanded area could be recruited and deployed two months after that. The entire province would thus be covered by the program by the end of May, 2003. The only two major project specific risks facing the expansion would be whether GOI can expedite revision of the budget documents, and how quickly additional consultants can be recruited and changed. An informed assessment is that both constraints can be overcome.

34

ANNEX 5

Outline Terms of Reference for Aceh Governance and Public Sector/Regional Public Expenditure Review 2003 The Aceh RPER will be conducted by {8} faculty members (economists, lawyers, political scientists), but will draw on broader dialogues with government and civil society. The team will closely coordinate with the Provincial Bappeda and its head Pak Chairul Ichsan and a team of civil society. The report would be completed by April 2002, and be disseminated in both English and Indonesian. The group will choose three case study focus kabupatens/kotamadya (e.g., Aceh Utara/Lhokhsumawe, Pidie, Aceh Tengah, Aceh Barat (including focusing on the recent splits to Aceh Barat Daya and Naga Naraya), and possibly Sabang. The Syiah Kuala team will adapt instruments/methodology drawn from other regions in Indonesia.

Workstream Theme Local Counterpart

Main Government Counterparts

Civil Society Respondents

Pre-CGI Outputs Possible Post-CGI Action Points (including timing and resource needs estimates)

Regional Public Expenditure Review

Centered on the theme of broad-based, responsive and effective service delivery and public investments for development

Islahudin Faisal Jeliteng Pribadi

Bapenas SEKDA/Kepala Biro Keuangan Kepala Dinas Pendapatan Daerah Komisi Anggaran DPRD Kepala Dinas Pertambangan dan Energi Tim Advokasi Migas Aceh Bawasda Dinas Pendidikan Dinas Kesehatan

Budget Transparency Groups (Sama/Somasa)

• Review of revenue sharing and management under special autonomy between province and local governments

• Predicted Revenue Flows in Medium Term (i.e., gas/oil)

• Relationships between province and LGs (Law 22/1999 versus Law 18/ 2000)

• Review of current planning instruments and processes, and how these link to consultation/implementation/execution processes

• Central Government Resources, Responsibilities, and Coordination with Aceh government

• Evaluation of expenditures and service delivery, especially in education (including special autonomy allocation of 30%) and health

• Extent of blocked donor projects and possible impact on fiscal disbursements/service delivery

• Civil service review (size, capacity, incentives, etc.)

• Relationship between executive,

• RPER (April 2003) • Public Expenditure

Tracking Study (PETS) for Health and Education (tbc)

• Medium Term Expenditure Framework Dialogue

• Prospects for Trust Fund Mechanisms to smooth expenditure absorption/revenue management

• Technical Assistance for Expenditure Evaluation

35

legislative, and civil society in planning, budgeting, and service provision

• Accountability mechanisms (e.g., financial management, audit mechanisms, administrative recourse)

• Judicial services and accountabilities (especially as related to Law 18/2001, and complementary systems).

Poverty & Social Monitoring for Effective Planning and Policy

Revitalizing Information on Service Delivery, especially in Health and Education

Masbar Nasmundin

BPS Dinas Pendidikan Dinas Kesehatan

PTAs • Understand the degree to which PEMDA has sufficient information for policy making & planning

• Review quality of comprehensive information on facilities, services, financing and welfare at the kecamatan/village level

• Post-CGI mission on health and education core services (early Feb)

• KDP Faclitator Village Survey on Core Service

• Recommend that standard BPS instruments like National Household Surveys (SUSENAS) be restarted

Investment Climate Appraisal

Mawardi (Lawyer), Sofyan Syahnur (Economist),

BKPMD Businesses, Business Associations, Transport Companies

• Case Studies (e.g., coffee) of key sectors to see what barriers & constraints to business are

• Interviews with transportation companies • Dispute resolution mechanisms (adat and

formal mechanisms) • Security for guarantees for business &

traders/human security

• Propose system for sustained monitoring of barriers to trade and illegal taxes and levies

• Complementary initiatives to reduce barriers (e.g., training, skills, and management)

• Methodology for Kabupaten Level Rapid Investment Climate Appraisals (June 2003)

• Monitor for example bus ticket prices/price gradients

• Options for strengthening dispute resolution

36

The Aceh work will build on the Regional Public Expenditure Reviews (RPER) completed by the World Bank (including cases on North Sumatra, West Java, and NBT), JICA (East Kalimantan and South Sumatra), and ADB. The standard diagnostic tools will be amended to address the respective issues of post-conflict/special autonomy. The team could the use WBs West Java and Lombok Timur case studies as examples. Under the rubric of information systems for planning and policy making, we will also examine next steps for attaining a more comprehensive picture of public services and facilities, especially in health and education. The work will build on an previous collaboration of the World Bank with the Faculty of Economics at UNSYIAH to complete a Poverty Survey in September 2002. The work will examine the degree to which the local government has requisite information for effective planning, policy making, and implementation regarding the provision of basic services throughout Aceh. The work would also draw on the Governance and Decentralization Survey (GDS 2002) instruments, the KDP Health and Education Service Facility Surveys, and the Regional Rapid Business Appraisal structured questionnaires. Special attention will be paid to poverty and vulnerability assessments in a post-conflict context. The investment climate work will identify the main economic sectors in Aceh, and develop a series of rapid/appraisals to identify scope for improving the business climate and monitoring its development. The work will build on previous experience of regional monitoring of taxes and regulations in 1999/2000 by SMERU under an ASEM project.

37

ACEH DONOR COORDINATION MATRIX Updated January 15, 2003

ANNEX 6

Organization Contact Phone No. Projects Disbursement Problems Remarks ADB Gedung BRI II, 7th floor Jl. Jend Sudirman Kav 44-46 P.O. Box 99 JKPSA Jakarta Pusat

David Green dgreen@adb.org Farzana Ahmed fahmed@adb.org Amanah Abdulkadir aabdulkadir@adb.org Anil Terway aterway@adb.org

6325511 0812-815-5048 6235511 (632) 632-6412 (p) (632) 636-2230 (f)

• L 1383: Sumatra Urban Development Sector Project

• L 1397: Power Development & Efficiency Enhancement Project

• L 1519: Development of Madrasah Aliyahs Project

• L 1527: Capacity Building of Water Supply Enterprises for Water Loss Reduction • L 1579: Northern Sumatra Irrigated Agriculture Sector Project

• Loan 1792-INO: Technological and Professional Skills Development sector Project

• L 1810: Decentralized Health Services

• 54% • 45% • 54% • 5% • 7% • 12%; allocation for

Aceh province; US$9,073,839.

Disbursement to date (Executing Agency – CPCU’s data): $1,142,308

• Major issues in procurement

process • Irregularities found in two

provinces • Relatively weak local capacity of new loan team. • ADB staff constrains

• The economic crisis

hampered the release of Government Counterpart funds. The situation has been rectified.

• Suspended on 12 June

2002. • Investigated • Project will be

transferred to IRM effective 31 January 2003.

• In full implementation. • 2 fellows for master

program in USA had difficulties in getting visa from US Embassy

• The project demands

intensive support and monitoring.

• Aceh has a good record

for project implementation. But new local team, constraints in field visit by ADB staff and central satff, and decentralization (DIP allocation, funds flow) has created some implemantation delay.

38

ACEH DONOR COORDINATION MATRIX Updated January 15, 2003

ANNEX 6

Organization Contact Phone No. Projects Disbursement Problems Remarks

• Other support for income generating activities and basic education is being considered

• Procurement of good for contracts below $50,000 equivalent authorized by central project coordination unit (CPCU). ADB’s approval for procurement of medical equipment and vehicles on 9 January 2003 (estimated value of the contract: US$2,340,853).

• Waiting for final bidding documents, under preparation with CPCU assistance.

DFID Yvan Biot 5720235 • Consolidating networks and building

39

ACEH DONOR COORDINATION MATRIX Updated January 15, 2003

ANNEX 6

Organization Contact Phone No. Projects Disbursement Problems Remarks British Embassy, Jalan MH Thamrin 75, Jakarta 10310, Indonesia

Ivan.biot@dfid.org.id Jim Carpy j-carpy@dfid.gov.uk Komang Sumariyani komang@dfid.gov.uk

0811848332 3156264x4252 3156264x4293

capacity between local indigenous peoples organizations in natural resource management – Naggroe Aceh Darussalam.

EUROPEAN Commission Wisama Dharmala Sakti, 16 th Floor, Jl. Jend. Sudirman 32. Jakarta 10220

Juan Planas Juan.planas@delidn.cec.eu.int

5706076 (p) x333 5706075 (f)

Leuser Development Project, which is cover almost two million hectares area in North Sumatra and Aceh provinces. The activities are: • Stabilize wildlife areas and reduce

conflict • Develop appropriate economic

activities and infrastructure around the periphery, including eco-tourism

• Carry out an applied research and monitoring program

• Build up a programme of awareness and support with local partners

• Contributing a grant of Euro 32.5 million.

• Massive logging and other pressures are a constant danger to the ecosystem.

JAPAN Embassy Menara Thamrin Bldg 8F Jl M.H. Thamrin Kav 3 Jakarta Pusat

Hiroshi Matsuura Matsuura@eoj.ntt.net.id Takeshi Kohno tkohno@eoj.net.id Masaki Tani Masaki.tani@mofa.go.jp

324308 x705 3983-9747 (dir) 0818992489 39839744 (p) 3152859 (f)

JICA Plaza BII, Tower II, Lt 27 Jl. M.H. Thamrin, No 51 Jakarta 10350

Motoo Taki taki@jica.or.id Tanaka Tsutomu tstanaka@jica.or.id

3907533 • Agreement for the Study for Sabang Integrated Regional Development in the Republic of Indonesia

• The study was suspended in April 2001, due to security reasons. • Due to change of the situation as well as the regional development plan for

the DI Aceh since the signing of the Scope of Work, it is necessary to make sure whether the contents of the previous TOR which specializes in Sabang area is still fesible or not for the

• The objective of this Study are:

1. to formulate Sabang Integrated Economic Development Zone (SIEDZ) regional development master plan for 2020. 2. to conduct pre-feasibilty study on prioritized projects identified under the master plan for 2020; and 3. to support for strengthening the planning

40

ACEH DONOR COORDINATION MATRIX Updated January 15, 2003

ANNEX 6

Organization Contact Phone No. Projects Disbursement Problems Remarks • The city of Banda Aceh had been

frequently damaged both by flush flood from Kr. Aceh and inland storm water combined with high tide. For instance, the inundiation in July 1996 caused serials damaged especially in the sub-basin 3, where important structures are located. Thus, urban drainage improvement is urgently required in Banda Aceh area.

• Country Focused Training in Japan (Regional Development) • In country training (Capacity Building

for Local Government) • Support for general Election 2004 • Support for Regional Health

still fesible or not for the commencement of this Study.

capacity of Indonesian counterpart personnel through the implementation of the study.

JBIC Summitmas II, 7th Floor Jl. Jend Sudirman Kav. 61-62, Jakarta 12190

Shigeo Nakagawa s-nakagawa@jbic.go.jp

5220693 • Syiah Kuala University Development Project (L/A No.: IP-418)

• Date of loan signing: November 4, 1993

• Loan Amount: JPY 5,467 million (equivalent to about US$ 46 million)

• The project has been continuously implemented even under the difficult security condition.

• The project aims to improve higher education in Aceh through the building construction of the faculty of Agriculture and Engineering and associated supply of equipments and fellowship program for the young lecturers.

• In 2001, Japanese Government approved loan extension and the

41

ACEH DONOR COORDINATION MATRIX Updated January 15, 2003

ANNEX 6

Organization Contact Phone No. Projects Disbursement Problems Remarks • Peusangan Hydroelectric Power Plan

Project (L/A No.: IP-441) • Rural Areas Infrastructure

Development Project (III) (L/A. No.: IP-506)

• Date of loan signing:

December 1, 1995 • Loan Amount: JPY

10,625 million (equivalent to about US$ 89 million)

• Date of loan signing:

July 5, 2001 • Loan Amount: JPY

20,039 million (equivalent to about US$ 168 million)

• The tender procedure has

been suspended due to withdrawal of prospective contractors due to security reasons.

• In Aceh, the project allocated about Rp 45 billion (equivalent to about $ 5 million) for 3 regencies (Kabupaten Aceh Tenggara, Aceh Tengah, and Aceh Barat) in 2001 and 2002 for improvement of village infrastructures

loan extension and the project is expected to be completed in 2003.

• The project will contribute significantly to the human resource development on Aceh

• The project aims to

meet the increasing power demand in Region I (Aceh) and Region II (North Sumatra) through construction of the 86 MW hydropower station along Peusangan River.

• The project is being co-financed by ADB.

• JBIC finances civil works portion of the project.

• JBIC will be able to examine the possibility of the re-tender when the peace process is smoothly implemented and the security condition is enough to attract capable international contractors.

• The project is

expected to further contribute to the community development in Aceh until 2004.

42

ACEH DONOR COORDINATION MATRIX Updated January 15, 2003

ANNEX 6

Organization Contact Phone No. Projects Disbursement Problems Remarks such as roads, bridges, water supply, and sanitation and small scale irrigation.

OCHA UN Building 5th Floor Jl. MH Thramin 14 P.O. Box 2238, Jakarta

Michael Elmquist Elmquist@un.org

3141308 x172 • UN Resource Centre in Banda Aceh (focal point for coordination of UN and NGO humanitarian activities in Aceh)

UNDP UN Building Jl. MH Thamrin 14 P.O. Box 2338 Jakarta 10240

Eugenia Piza-Lopez Epiza-Lopez@undp.org Guy Janssen Guy.janssen@undp.org Alan Prouty alan.prouty@undp.org Andre Klep Andre.klep@undp.org Kristanto Sinandang Kristanto.sinandang@undp.org

3141308 x202 3141308 x201 08129442576 3141308 x136

• Conflict Prevention • Governance • Community Recovery Program (CRP)

UNICEF Wisma Metropolitan II, 10th & 11th Floor Jl. Jend. Sudirman, Kav. 31, Jakarta 12920 P.O. Box 1202/JKT, Jkt 10012 UN RESOURCE CENTER Representative Office in Banda Aceh

Konrad Huber khuber@unicef.org Siddarth Chatterjee schatterjee@unicef.org Steve Aswin saswin@unicef.org Eirik Gronvold unicefaceh@telkom.net

5711326 x 236 0811194651 0811-142232 0812-1034472 0812-1034377

• Ongoing peace education project with Nonviolence International

• Ongoing emergency education support, including teacher training, and plans for school wat-san and hygiene promotion

• Limited emergency health support, including National Immunitation Week

• Plans for psychosocial support, child participation, and data collection on child combatants

US EMBASSY David DiGiovanna DigiovannaDC@state.gov

34359071 0816935751

• Political Issues

USAID John D. Lindborg • Economic development

43

ACEH DONOR COORDINATION MATRIX Updated January 15, 2003

ANNEX 6

Organization Contact Phone No. Projects Disbursement Problems Remarks jlindborg@usaid.gov Jim Hope jahope@usiad.gov Michael Stievater mstievater@usaid.gov

34359381 34359347 08161908571

USAID/OCPR DAI-Program Support Initiatives for USAID’s Office of Conflict Prevention and Response Menara Duta, Lt 2, Wing B Jl. Rasuna Said, Kav. B-9 Kuningan, 12910 Jakarta

Laurie Pierce Laurie_Pierce@dai.com

0811311846 • Made some quick grants to secure the peace of Aceh

• A new grant to the HDC to expand the efforts of the Public Information Unit (PIU)

• A new grant for the economic recovery through traditional group through CARDI

• Establishing economic self sufficiency for female heads of households through ICMC

• Expanded support to IMC for work in water and sanitation, with IDPs displaced by the conflict.

• Selected 21 local NGOs, and will develop grant with each in Jan. 03 for small scale development support (agriculture, health, education, enterprise development and human rights).

World Bank Jakarta Stock Exchange Bldg Tower 2, 12th floor Jl Jend Sudeirman Kav. 52053 Jakarta 12190

Farida Zaituni Scott Guggenheim sguggenheim@worldbank.org Tom Walton Kai Kaiser kkaiser@worldbank.org

5299-3040 5299-3052 5299-3080

• KDP 2; has 2,000 project funded villages and 700 local government funded ones (TA at 20%). The cycle begins in January 2003, with facilitator training. No activities delay in this cycle, although the overall project is behind schedule because of national level issues.

• KDP 1; 7 districts, 63 kecamatans, and

1,234 villages (40% of the provincial population)

• No disbursements expected until May or so of 2003 (but approx. $ 13M will be disbursed in 2003).

• Infrastructure: 96%

(year I), 92% (year II), and 98% (year III).

• Loans: 4% (year I), 8% (year II), and 0.6% (year III)

44

ACEH DONOR COORDINATION MATRIX Updated January 15, 2003

ANNEX 6

Organization Contact Phone No. Projects Disbursement Problems Remarks • Education: Junior Secondary Education

(JSE), contract teachers and block grant for Junior Secondary Schools for quality improvement, and managed by school committee.

• Irrigation: IWIRIP (Indonesia Water

Resources and Irrigation Reform Implementation Program), institutional strengthening to support irrigation reform and very small civil works.

• Agricultural: Decentralized Agricultural

and Forestry Extension Project (DAFEP).

• Conservation of Elephant Landscapes

in Aceh (CELA): (GEF – Medium Size Project).

• Misc.: 0% (year I), 0% (year II), and 1.4% (year III).

• FY 2003: Rp 140

million (incl. 10% local government’s contribution). These budget will be about Rp 60 million for the province and Rp 40 million each for Kabupaten Aceh Selatan and Pidie.

• Total: US$ 8.69

million. • 2 districts (Aceh

Barat and Pidie) • Total: US$ 627,000,

disburse US$ 591,290.

• FY 2002: No project

activities in the field, because could not visit the sites. Only training and coordination in Jakarta.

• Limited field activities due to

security situation. • The Bank can not conduct

field supervisions, and relies on reports from district project staff through meeting in Medan or Jakarta and central project staff regularly visit the province.

• Relatively low capacity of the project staff compared to other districts.

• Because of security

reasons, field activities are limited.

• Current project issue is the development of road in Aceh called “Ladiagalaska”, which may affect the forest as elephant corridors.

• Extended and will close

in December 2003. • Institutional

strengthening to support irrigation reform and very small civil works.

• Extended and will close in December 31, 2004.

• Project activities are: (i)

enhancement of farmer’s capacity to participate in and lead extension activities, (ii) strengthening the district extension system, and (iii) provision of central extension policy and project management support.

• Closing Date: March 31, 2004.

• Closing Date: December

31, 2002 (original). • Extended: December

31, 2003

45

ACEH DONOR COORDINATION MATRIX Updated January 15, 2003

ANNEX 6

Organization Contact Phone No. Projects Disbursement Problems Remarks • Sumatra Regional Roads Project

(SRRP); Ln 4307 - IND

591,290. • Aceh component is

about $ 16 million of which close to $ 14 million has been committed, bur less than $ 11 million disbursed.

• Major problem on

procurement side has been lack of control and understanding of Bank procurement procedures at kabupaten level where most of the project implementation has been occurring.

Additionally once contracts have been awarded, access has been difficult in many locations in Aceh and this has delayed contract implementation, extending.

31, 2003 • To conserve biologically

rich forest ecosysytems in Northern Aceh, focusing on the lowland forests that are important wildlife corridors, especially for elephant.

• To maintain biological corridors between the well protected Gunung Leuser ecosystem and the Nothern Aceh forests.

• Implemented by Flora & Fauna International (NGO), with the field offices in Medan and Banda Aceh.

• Extending some

contracts from 3 months to well over 12 months for implementation and still not completed.

WB51267 L:\Aceh\CGI Report \final report components\CGI Brief - Aceh.doc January 23, 2003 6:01 PM