Traffic is hardly something ones hopes for in a city, but in Banda Aceh the occasional snarl is a welcome sign that life is finally getting back to normal, three years after the capital of Aceh was devastated by the most powerful earthquake ever to hit the region. Now, three years after the Indian Ocean tsunami, the province on the northern tip of Sumatra island is seeing a dramatic rise in the number of vehicles on the streets. "I got stuck in a traffic jam last week but really didn't mind," says Arian Ardie, a business consultant with projects in the province. "I was just happy to see the city has come back to life."
Aceh's economy has posted impressive gains since life came to a halt on December 26, 2004, when more than 160,000 people were killed and its infrastructure flattened. Officials have praised the official body responsible for rebuilding the province, the hundreds of aid organizations that joined the effort and of course the Multi Donor Fund that has already distributed more than $500 million to the area since it was set up by the World Bank in May 2005. "The donors and a lasting peace have helped us rebuild our economy," says Deputy Governor Mohamad Nazar. "Our challenge now is to revive the agricultural sector in order to absorb unemployment and provide for the Acehnese when the reconstruction effort has come to an end."
The mandate of the Agency for Rehabilitation and Reconstruction, or BRR, will officially end in May 2009, but the body has already completed 80% of the roads, houses and health facilities it was tasked with rebuilding. The agency chalks up much of its success to strong oversight but does admit that managing more than 12,000 projects has not been easy in a country known for corruption, excessive mark-ups and exorbitant fees. "There is no systemic corruption, but you still find stealing," says BRR Head Kuntoro Mangkusubroto, who has overseen the building of more than 84,000 houses and 1,500 kilometers of roads.
World Bank officials, administering the Multi Donor Fund which totals $673 million from 15 donor nations and agencies say built-in measures like hotlines have helped prevent the corruption many feared would plague the reconstruction effort. "We have had cases of misuse of funds but the mechanisms are working and can always be improved," explains Joachim von Amsberg, the World Bank's country director in Indonesia. "I would never say there was zero percent leakage but we have measures in place."
Despite apparent success in distributing the funds, the Bank's economic outlook for Aceh is less than rosy even after it posted 7.7% growth in 2006 and an unemployment rate of 10% in the first half of 2007, about the same as the national average. "Reconstruction is driving a modest economic recovery in Aceh," concludes the Bank's latest Aceh Economic Update, released in November 2007. But, it warns, "given the lackluster performance of sectors not linked to the reconstruction effort, current growth is not sustainable." In particular, the decline in oil and gas production, the resource-rich region's driving economic force, has hit Aceh hard. (The decline is not entirely Tsunami related: while northern Sumatra has several oil and gas fields, they are expensive to develop.) Non-energy related industries, meanwhile, grew only 1.1% in 2006, below pre-Tsunami levels. In addition, the local government continues to struggle with a persistent inflation rate of 8.5%, compared to a national level of 5.7%.
While the challenges remain, locals are optimistic the province has turned the corner since the tragedy and the signing of a peace treaty with separatist rebels in August 2005 that brought an end to 29 years of fighting. "Things are much safer now and it is just the normal city problems of petty crime and theft," says Muni Munadjat, a local entrepreneur. "If I decide I want to drive to Medan [south of Banda Aceh] at midnight I can, there are no more [extortionist, rebel-led] sweepings [of the area] or [police-manned] checkpoints [to counter the rebels]." Sporadic gridlock may hinder that new-found freedom of movement, but ultimately things are moving along as four million Acehnese get past the trauma and get on with rebuilding their lives.