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The Impact of the Asian Tsunami on Indonesias Economy*

Budy P. Resosudarmo Economics Division Research School of Pacific and Asian Studies The Australian National University

1. Introduction
Survivors of the Asian tsunami of 26 December 2004 in the northern and western parts of Aceh as well as in islands around those regions, such as the islands of Nias and Simeulu, still remember how a massive earthquake measuring 9.0 on the Richter scale shook the earth around 8 am that day, and about 15 minutes later, a tsunami hit their regions. Waves as high as 10 m hit the city of Banda Aceh located in the northern part of Aceh and as high as 12 m hit the cities of Meulaboh, Calang and Lamno located in the western part of Aceh, submerging areas up to about 10 km from the coastline (Soehaimi et al. 2005). The tragedy began. Those not personally affected saw their families, relatives and friends swallowed up by the tsunami and many did not survive or remain missing. Of the ten countries hit by this tsunami, Indonesia suffered the most. By mid March 2005, it was reported that the death toll was close to 167 thousand people, approximately 128 thousand missing and 811 thousand internally displaced. Almost all the victims (around 99.8 per cent) were in Aceh, particularly those who live on the northern and western coasts. These numbers far exceed those in the three other most affected countries; i.e. Sri Lanka (around 30 thousand dead, 6 thousand missing and 500 thousand displaced), India (around 11 thousand dead, 6 thousand missing and 648 thousand displaced) and Thailand (around 5 thousand dead, 3 thousand missing and 3 thousand displaced) (Athukorala and Resosudarmo 2005). Within Indonesia, Aceh was the area affected the most. More than 99 per cent of humans lost and physical damages caused by this Asian tsunami were in Aceh. Meanwhile, Aceh had suffered a long-term, around 30 years, socio-political conflicts with the Aceh Freedom of Movement (GAM or Gerakan Aceh Merdeka) and the Indonesian government; causing difficulties for many people in Aceh to do their activities and to access education and health facilities as well as other public services. Aceh hence became one of the poorest regions in the country. This Asian tsunami certainly made life much more difficult for many Acehnese people, and more importantly created a challenge in conducting rehabilitation and reconstruction activities in the post-tsunami period.

Paper presented at the ASEAN Roundtable on The Asian Tsunami: Implications on Regional Development and Security, Singapore, 1718 November 2005. The author would like to thank Premachandra Athukorala of the Australian National University and participants of the roundtable for many valuable comments. Nevertheless, mistakes remain the authors responsibility.

Emergency relief support from various domestic as well as international agencies and organisations was considerable and prompt. International donor response has been remarkable and overwhelming. By mid February, approximately 34 countries and various organisations had made pledges and commitments amounting to US$ 800 million to support various emergency relief and rehabilitation efforts in Aceh and Nias. At the end of January, members of the Consultative Group for Indonesia (CGI) agreed to provide grants and loans amounting to US$ 1.7 billion for the reconstruction of Aceh. Most of these funds were distributed through non-government institutions (NGOs). This amount of international funding and the unexpectedly significant roles played by NGOs had never before been experienced by Indonesia. The main purpose of this paper is to analyse the impact of this huge natural disaster affecting a heavy conflict area, international responses and the expectedly significant roles of NGOs on Indonesias economy and development in general. First, this paper will discuss the nature of natural disasters in Indonesia. Second, it will review the impact of this disaster on Indonesias economy. Third, it will record the on-going activities and the challenges involved in the reconstruction of Aceh and Nias.

2. Natural Disasters in Indonesia1

Indonesia is located in the Ring of Fire, which consists of volcanic arcs and oceanic trenches partly encircling the Pacific Basin, between the Indo-Australian and Eurasian plates, making it a zone of frequent volcanic eruption and earthquakes. Of the hundreds of volcanoes in Indonesia, approximately 76 are historically active volcanoes. In this sense, Indonesia has the largest active volcanoes in the world. The majority of these volcanoes (around 76 %) are located in the arc composed of Sumatra, Java and the Lesser Sunda Islands. There are around 1,200 dated eruptions in Indonesia, only narrowly exceeded by Japan's approximate 1,300. These two regions have combined to produce one third of the known explosive eruptions throughout the world. Indonesia has suffered the highest number of eruptions producing fatalities, damage to arable land, mudflows, tsunamis, domes, and pyroclastic flows. Four-fifths of Indonesian volcanoes with dated eruptions have occurred in this century (USGS 2003). Three of these eruptions were considered among the largest and most deadly eruptions ever worldwide. The first was the eruption in 1815 of the Tambora volcano in the Sumbawa Island, West Nusa Tenggara the greatest eruption in recorded history. During this eruption, the tremendous amount of ash thrown into the atmosphere resulted in an abnormally cold summer in the Northern Hemisphere. This eruption killed approximately 92 thousand people. The second is the notorious Krakatau eruption and tsunami in 1883. Krakatau volcano is in the Sunda strait between Java and Sumatra islands. This eruption was the fourth greatest eruption in recorded history. This event killed approximately 36 thousand people (Tomascik et al. 1997). The third was the case of Kelud volcano located in East Java. Kelud has erupted several times and two eruptions have caused fatalities. The first was the 1586 eruption. This eruption produced one of the worst lahars in the historical record of

See also Athukorala and Resosudarmo (2005)

volcanic eruptions and took the lives of about 10 thousand people. The second was the 1919 eruption, destroying a hundred villages and killing approximately 5 thousand people (Bergen et al. 2000). Other large and deadly eruptions were the cases of Galungung volcano West Java in 1882, causing approximately 4 thousand deaths, Agung volcano Bali in 1963 causing around 1,500 deaths, and Merapi volcano Central Java, not far from the heavily populated and tourist towns of Solo and Yogyakarta. Merapi erupted several times, 1930, 1931 and 1951 being among the deadliest. Each of these eruptions killed approximately a thousand people (USGS 2003). The geological composition of the Indonesian archipelago also causes earthquakes. Earthquakes are one of the geophysical catastrophes originating mostly along the boundary of tectonic plates. Earthquake activity in Indonesia is mostly located on the west coast of Sumatra, the south coast of Java, the northern part of Papua and in north Sulawesi. Approximately ten per cent of the worlds seismicity occurs in the Indonesian archipelago. The after-effects of this seismic activity are tidal waves, which can be more destructive than the earthquake itself (Tomascik et al. 1997). Three of the earthquakes in Indonesia were considered as having a magnitude among the largest in the world. One, which is the focus of this paper, was among the deadliest in the world. The first of the other two to occur was in Bali on the 21st of January 1917. The earthquake created a tsunami and both of them flattened and destroyed thousands houses in the island. It was report around 15 thousand people died during this event. This earthquake is among the 25 most deadly earthquakes in the world so far. The other one was on the 12th of December 1992 on the Island of Flores and was also followed by a tsunami. The tsunami ran 300 meters inland with waves as high as 25 meters. The event killed approximately 2,500 people, and around 90,000 were left homeless. Between 50 to 80 % of the structures on Flores were damaged or destroyed. Damage also occurred on surrounding islands such as Sumba and Alor (NGDC 2004). Not that long after they were hit by the 26th of December 2004 earthquake, two more large earthquakes hit the islands of Simeulu and Nias again. The first one was on the 28th of March 2005 causing around a thousand deaths on the islands of Simeulu and Nias. The other one was on the 19th of May 2005. Fortunately, these two earthquakes did not create any major tsunami in the area. The contour and climate in this archipelago also have the potential to cause other deadly natural disasters such as cyclone, drought and flood. The World Health Organization Collaborating Centre for Research on the Epidemiology of Disasters (WHOCRED) estimated that, from around 1907 to mid 2005, there were approximately 320 events of deadly natural disasters in Indonesia (Table 1). The centre also estimated that, on average, approximately 718 people have died and approximately 57 thousand people have been affected per event. On a per annual basis, there were around 3 deadly natural disasters; causing around 2 thousand people to die and affecting approximately 172 thousand people annually. Clearly natural disasters happen frequently in the country. Figure 1 presents the frequency of these natural disasters occurring between 1950 and mid 2005. It can be seen that the number of natural disasters recorded in every

decade has increased. If this trend continues, it should be expected that Indonesia will face more frequent natural disaster events. Considering that some of them might cause severe damage, as has happened in the past, Indonesia should develop strong and solid systems and institutions of natural disaster prevention, detection, early warning and management.

3. The Impact
In just several minutes after the earthquake, the tsunami following this earthquake affected thousands of people in Aceh and Nias. Ironically, most Indonesians and the rest of the world only knew how badly the tsunami had hit Aceh one or two days after the event, whereas they had news of the impact of the tsunami in Sri Lanka and Thailand immediately after the devastation. The conflict between the GAM and the Indonesian government had severely constrained the dissemination of information on Aceh not only to the rest of the world but also to other parts of Indonesia. When more complete information on the devastation in Aceh was made available, the world was astonished by the numbers of people killed, missing and displaced in Aceh as well as by the amount of destruction.

3.1. Humans Lost and Internally Displaced

From one or two days onwards after the event, data on the number of victims increased daily. By the end of January 2005, the Indonesian government was able to publish a detailed report on the number of these earthquake and tsunami victims as seen in Table 2. Note this report also mentions that around 5 thousand people were in hospitals, and around 480 thousand people in refugee camps. In terms of the number of people killed and missing, not all regions in Aceh and North Sumatra suffered the same level of devastation. The city of Banda Aceh suffered the most; followed by the districts of Aceh Jaya and Aceh Barat. In terms of percentage of population affected, Aceh Barat district suffered the most, followed by the city of Banda Aceh, Aceh Jaya and Aceh Besar, in that order. The impact of the earthquake and tsunami is concentrated in these four regions located on the northern and western coasts of Aceh (Map 1). Within these four regions, the devastation across villages also varies. There are villages with more then 70 per cent of their population killed or missing, and some that only lost a few of their members. After publishing this report, the Indonesian government still kept updating the number of victim of this Asian tsunami. By mid March 2005, the official death toll reached around 167 thousand, 128 thousand missing and 811 thousand internally displaced. Significant numbers of these victims were women and children (Bakornas PBPb 2005). In August 2005, the government corrected the number again to approximately 125 thousand people dead, with over 94,000 still missing (Indrawati 2005). According to information gathered by the Ministry of Marine Affairs and Fisheries, by mid January approximately 55 thousand fishers and aquaculture workers were among the dead, i.e. approximately half of the total number of fishers and aquaculture workers in Aceh, and around 14 thousand were still missing (FAO 2005). Humans lost (dead and missing) and internally displaced is the number one impact of the 26th December Asian tsunami event. Furthermore, since many of the victims were working in the fishery sector, many of the victims were women and children and the 4

fact that in several villages up to 70 per cent of their members were among the dead, the tsunami significantly changed the demographic structure of the population in several places in Aceh. The question remains whether or not some local economies, some villages or even, in general, the path of development in Aceh will be ever the same as before the devastation. It is also important to note that transfers of property rights on capital, particularly land, owned by tsunami victims became an issue.

3.2. Physical Damages

A quick survey through 14 districts most affected in Aceh found that approximately 27 thousand houses were destroyed and the tsunami damaged infrastructures in 172 sub-districts (kecamatan) covering approximately 1,550 villages, and in the islands along the north and west of Aceh (DepSos 2005). The Asian Development Bank (ADB) produced a different estimate, namely that the tsunami has flattened some 115 thousand houses and severely damaged another 150 thousand (ADB 2005). The Food and Agriculture Organization (FAO, 2005) reported that 40 to 60 per cent of coastal aquaculture ponds along the coast of Aceh and between 36 thousand and 48 thousand ha of brackish water aquaculture ponds (that mainly produced shrimp and milkfish) were seriously damaged. It is estimated that about 6570 per cent of the small scale fishing fleet and associated gear was destroyed in Aceh, representing approximately 9,500 units, of which 40 per cent were canoes, 25 percent with outboard motors, and 35 per cent with diesel inboard motors. The FAO also reported that about 30 thousand hectares of rice fields, amounting to about 10 per cent of the total area under rice cultivation in the province, were badly affected. The World Bank, using a standard assessment technique developed by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), provided a comprehensive estimate of the total damages and losses caused by the earthquake and tsunami. According to the Bank, the total damage and loss was approximately US$ 4.45 billion or almost 100 per cent of Acehs GDP in 2003 (Table 3). Around 78 per cent of the total damages and losses were borne by the private sector and the rest by the public sector. The damages and losses in the private sector were mostly of houses and fishery related production capital. The Bank predicted that around 1.3 million homes and buildings were destroyed or heavily damaged. The damages and losses in the public sector were concentrated in the transportation sector. Approximately 120 km of road and 18 bridges as well as approximately 85 per cent of water sanitation facilities in urban areas along the north and west coast of Aceh were ruined (World Banka 2005). LPEM-FEUI (Institute for Economics and Social Research-Faculty of Economics University of Indonesia), using the village level data system (PODES), estimated that around a third of the road network, schools and hospitals were destroyed by the tsunami (Table 3). They further predicted that the total damage caused by this tsunami might be in the order of around US$ 4.6 billion (LPEM-FEUI 2005). Although LPEM-FEUIs numbers indicate that the physical damages caused by the tsunami were around 25 to 30 per cent, it is important to recognise that they vary considerably across areas. There were areas that lost up to 70 per cent of their physical capital; however, there were areas that were not so heavily damaged. Picture 1 illustrates an area in the northern part of Banda Aceh that was heavily damaged. In

the areas with this kind of damage, identifying ownership of physical capital, particularly land, has become a major problem.

3.3. The Economic Impact

From Table 2, it can be seen that the impact of the Asian tsunami on North Sumatra province was concentrated in the district of Nias. There is not much trade between Nias and other parts of North Sumatra. Its contribution to the economy of North Sumatra is very small. The impact of the destruction in Nias on the outside regions is expected to be trivial. Hence, the discussion in this section will focus on the impact of the tsunami on Acehs economy and on the Indonesian economy in general. Before discussing this topic, it is important to understand the characteristics of Acehs economy and its role in Indonesia before the tsunami. Aceh is certainly one area in Indonesia that is well known for its rich natural resource endowment, particularly oil and gas. The development of these oil and gas sectors started in the mid 1970s. Table 4 shows that Acehs economy in 1971 was still dominated by its agricultural sector. Acehs gross domestic product (GDP) per capita was almost equal to the average national GDP per capita. During the mid 1970s, Acehs economy was dominated by the oil and gas industries. These industries caused Acehs economy to grow much faster than that of most regions in the country. In 1983, Acehs contribution to the national GDP was close to 5 per cent and Acehs per capita GDP about 3 times that of the national average. Aceh became one of the richest provinces in the country together with Riau, East Kalimantan and Jakarta. It is important to note, however, that the percentage of poor people in Aceh (11.6 %) was not much less than the total percentage of poor people in the country. In 1996, Acehs GDP per capita was still among the highest, although other provinces were catching up. By this year, Acehs contribution to the national GDP declined to around 4 per cent and its GDP per capita was around twice the national average. The manufacturing sector, particularly the oil and gas industries grew only at a moderate rate during the 19831996 period. The encouraging news during this period, however, was that the proportion of poor people reduced significantly in Aceh from 11.6 per cent in 1983 to 6.3 per cent in 1996; the total percentage of poor people in the country was still 11.3 per cent. In 2002, Acehs GDP per capita was lower than that of 1996. The main reason for this decline was the escalation of social and political conflict in the area with the GAM. What is more worrying was that the proportion of poor people increased to around 29.8 per cent much higher than the national level and became among the highest in the country. The Ministry for the Development of Least Developed Regions had classified 11 districts in Aceh (around 50 percent of the province) as least developed districts. The conflicts had also destroyed and damaged about 900 schools and school attendance had dramatically declined. Meanwhile, health care had become less accessible because people were afraid to visit health facilities for security reasons (Soesastro and Ace 2005; World Banka 2005). In 2003, Acehs GDP was approximately US$ 4.5 billion or around 2.3 per cent of the total GDP of the national economy. Oil and gas industries and agriculture were two

sectors that dominated Acehs economy, contributing 43 per cent and 32.2 per cent of the regional GDP, respectively. In agriculture, livestock (10 %) and food crops (10 %) contributed the highest share. Fishery contribution was relatively small, i.e. around 6.5 per cent (World Banka 2005). Acehs export to other regions in Indonesia was only approximately 8 per cent of Acehs output. 26 per cent of Acehs output was exported abroad and 66 per cent of its output was consumed within the province. Import from other regions in Indonesia and import from abroad were only 6 per cent and 4 per cent, respectively, of the total material inputs needed for Acehs production sectors. From the discussion above, it can be seen that shortly before the tsunami event, Acehs contribution to the national economy was relatively small. It has typically been much lower than the contributions of Jakarta, West Java, Central Java, East Java, Riau or East Kalimantan to the national economy. Acehs economy has been dominated by the oil and gas industries since the 1970s. The contribution of the fishery sector to Acehs economy has been relatively small. What was important about Acehs economy was that the percentage of poor people was high, close to 30 per cent. As previously discussed, the agricultural sector is the most affected, particularly the fishery sector, both in terms of the number of casualties and capital destroyed. The oil and gas industries escaped the tsunami virtually unharmed (Soesastro and Ace 2005; World Banka 2005). From observing the characteristics of Acehs economy, it is to be expected that the impact of the tsunami on Acehs economy would be relatively moderate and the impact on the national economy small. However the impact on the percentage of poor people could be severe as a significant number of people lost their capital and jobs. In the food crop sector, the FAO (2005) observed that affected areas will lose two consecutive paddy seasons. The 2005 output of the fishery sector is expected to fall by up to 50 per cent for marine fishing and 41 per cent for brackish water aquaculture. The livelihoods of some 330 thousand working people (i.e. around 600 thousand people if including their families), mainly in the food crop and fishery sectors, have been threatened. On a more macro economic level, the World Bank conducted a comprehensive analysis and predicted that Acehs GDP would contract by 7 per cent to 28 per cent compared to the 2004 level. They further estimated that if Acehs economy contracted moderately; i.e. by around 14 per cent, the per capita income would be expected to reduce by one third, increasing unemployment rate from around 9.4 (in 2004) to 27.5 per cent and the percentage of poor people up to 50 per cent. The Bank then estimated that GDP growth Indonesia in 2005 would be only between 0.1 per cent and 0.4 per cent lower than the pre-tsunami growth forecast (World Banka 2005). LPEM-FEUI came up with a slightly different estimate of GDP contraction, namely 22.3 per cent. However, LPEM-FEUI also predicted that the percentage of poor people would increase up to 50 per cent. And the agency argued that the growth of the Indonesian economy would be slightly lower, around 0. 56 per cent, compared to the situation without the tsunami (LPEM-FEUI 2005).

The average rate of inflation in Banda Aceh in January 2005 was 7.02 per cent, while for the whole country it was only 1.43 per cent. The highest rates of inflation were for processed food and food products 19.26 per cent and 11.24 percent, respectively. House rents were also increasing rapidly. This high rate of inflation did not last long. In February, the inflation rate went down and stayed relatively close to the national rate after that (Figure 2). Nevertheless the price differences between Banda Aceh and the national average has not returned to the level of the pre-tsunami period.2

4. Disaster Management and Reconstruction

The first question on hearing the extent of the devastation in Aceh and the surrounding areas typically concerned how effective the rescue efforts were in saving the lives of victims. After establishing that significant rescue efforts had been conducted, the next three questions would most likely be as follows. First, how did this disaster happen? Second, how can the people of Aceh and Nias recover and their regions be reconstructed? What are the lessons learnt so that similar devastation can be avoided?

4.1. Disaster Prevention, Early Warning System and Mitigation

Seismic activities have occurred so often in Indonesia, that one would expect there to be agencies responsible for monitoring these activities and developing mitigation procedures. The three main agencies responsible are the Meteorology and Geophysics Agency (Badan Meteorologi dan Geofisika), the Volcano and Geological Disaster Mitigation Directorate (Direktorat Vulkanologi dan Mitigasi Bencana Geologi) at the Ministry of Energy and Mineral Resources, and the Centre of Geological Research and Development (Pusat Penelitian dan Pengembangan Geologi). Other agencies, such the Agency for the Assessment and Application of Technology (Badan Pengkajian dan Penerapan Teknologi) and the Indonesian Science Institute (Lembaga Ilmu Pengetahuan Indonesia), as well as various universities in the country, such as the Bandung Institute of Technology and the Surabaya Institute of Technology, also conduct research and monitoring activities in this area as well as designing some mitigation procedures. And when a natural disaster event occurs, the Indonesian Emergency Relief Coordination Agency (Bakornas PBP or Badan Koordinasi Nasioal Penanggulangan Bencana dan Penanganan Pengungsi) and the Department of Social Services are responsible for conducting relief activities and managing the refugees. Since the Flores tsunami in 1992, these agencies and universities, with the help of international institutions, have been conducting further research and monitoring activities on tsunami events in Indonesia. Banyuwangi tsunami in 1994 and Biak tsunami in 1996 further encouraged such activities. A few years ago, these agencies jointly produced a map indicating where tsunami events are most likely to occur. This map was made available to the public upon request (Montgomery 2005).

Note the high rate of inflation in October 2005 was nothing to do with the tsunami. It was induced by the decision of the government to increase the domestic prices of fuel oil.

Due to the unavailability of enough funding, however, a systematic and comprehensive tsunami monitoring system has never been developed. Critics have brought the absence of such an important system to the attention of national authorities and the public several times. A series of articles was published in the main national newspaper, Kompas, on possible events of earthquake leading to tsunami and their likely impacts in areas from along the west coast of Sumatra, the south coast of Java, Nusa Tenggara up to the Banda Sea (Kompas 18 February 2001, 26 October 2002, 2 November 2002, and 21 December 2002). These articles however were not able to induce the central and regional governments to prioritise setting up a prevention strategy, and monitoring and early warning systems related to tsunami events. If any of these activities were appropriately established, annihilation such as that of the Asian tsunami of 26th December could probably be lessened, though most likely not by much, since the epicentre of the earthquake was too close to Aceh and the tsunami was just too big. An interesting case to note is that of Simeulu island, around 100 km northwest of Nias island, hence very close to the epicentre of the earthquake; closer than any coast of Aceh to the epicentre. Simeulu Island was severely hit by the earthquake and tsunami. Approximately 5,500 houses were destroyed; hundreds of people were injured; however, only seven deaths were recorded (Kompas 1 April 2005). The two main reasons that the death toll in the Simeulu Island was rather low are the following. First, the coastal ecosystem, namely the coral reef, seagrass and mangrove forests surrounding the island, particularly in the northern part, was relatively undisturbed; i.e. they were in very good condition. This was able to soften the force of the giant wave when reaching the coast (Montgomery 2005). Second, local culture (adat) on the island, passed down from generation to generation for hundreds of years, recognised a tsunami event, explained indications when such an event would occur, and described the procedure to escape from this wave. The procedure is the following. Once one recognises some indications that a tsunami will occur, one should shout: tsunamitsunamitsunami (in their local language) and run to the closest hills. Others hearing this warning should directly leave whatever they are doing and run as quickly as possible to the closest hills while also shouting to warn others. This simple procedure has turned out to be very effective (Wetlands International-Indonesia Programme 2005; Kompas 1 April 2005) Evidence of the importance of the coastal ecosystem in mitigating the impact of a tsunami comes from other affected areas in Indonesia as well. For instance, the impact of the tsunami was less severe in areas along the west and east coast of Aceh, where the coastal ecosystem remained in relatively good shape. The damage was much more severe in coastal cities, where housing, tourism and destructive fishing has disturbed the coastal ecosystem (Wetlands International-Indonesia Program 2005; Montgomery 2005). A modern tsunami detection, early warning and mitigation system was and is not available in Aceh and Nias, and it is most likely so in the rest of Indonesia. Simple traditional mitigation procedures, imbedded in local culture, such the one in the Simeulu Island, either have been forgotten by the people in other areas or have never existed. Indonesia clearly needs to build a more systematic system of disaster prevention, monitoring, early warning system and mitigation: starting from conserving coastal ecosystems, then introducing simple natural disaster detection,

early warning system and mitigation procedures such as the one in the Simeulu island and embedding it in the national elementary education program, and, later on, providing modern monitoring technologies.

4.2. Rescue, Relief and Outsider Responses

In the first couple of days after the event, since very little information was received by the outside world, rescue and relief operations were relatively limited and slow. When the outside world started to realise what had happen in Aceh and Nias, they quickly responded. Nevertheless, in the first week after the event, despite some criticism, the role of the Indonesian military in conducting rescue and relief operations, and removing dead bodies was very significant. By the beginning of the second week, the number of domestic and international organisations arriving in Aceh increased significantly. All of these organisations did whatever they could wherever they saw some need. There was probably a lack of coordination among these organisations; however, being able to provide relief for the tsunami victims was much more important. In the third week, the number of international organisations arriving in Aceh kept increasing. It is estimated around 250, both domestic and international, organisations sent representatives to the region to assist in emergency relief efforts, and countless others provided assistance in some form or another. Their contributions were certainly appreciated and, in general, it could be said that they performed excellent relief activities (Indrawati 2005). International response to collecting funding to support various emergency relief activities was also quick and pleasing. By mid February, the Office for the Coordination of Humanitarian Affairs (OCHA) recorded that the amount of pledges and commitments by approximately 34 countries and various organisations supporting relief and reconstruction activities in Aceh and Nias had reached around US$ 800 million (OCHA 2005). The amount spent for programs in Indonesia will most likely be higher than US$ 800 million, since some pledges and commitments made to the overall tsunami affected regions will also be distributed in Indonesia and more pledges and commitments are being made. It is also important to note that the figure reported does not include donations in kind and various soft loans for the reconstruction of Aceh and Nias. For example Australia has agreed to provide soft loans of as much as AU$500 million over the next 5 years. The total number reported by the OCHA also does not include the value of debt moratorium or debt swap offered by several countries such as Germany, France and Italy. This is probably the most generous international response ever to a natural disaster in Indonesia (Athukorala and Resosudarmo 2005). The exact amount of funding committed by international donors for Aceh rehabilitation and construction is difficult to calculate. Another source would be the commitments made by the members of the Consultative Group for Indonesia (CGI) in their meeting on January 1920, 2005. CGI members agreed to contribute as much as US$ 1.7 billion in 2005 for the reconstruction of Aceh. This is approximately 35 per cent of the total estimated damages and losses. This response of the CGI members is certainly an overwhelming one. Of this amount, US$ 1.2 billion will be in the form of grants and the remaining US$ 0.5 billion in the form of project loans on very soft terms (zero or near zero interest). Of the US$ 1.2 billion grants, only US$ 0.2 billion


will be distributed through the Indonesian government. The rest will be distributed through non-governmental organisations (NGOs), clearly revealing a concern on the part of the donors regarding the ability of the central government to use these funds transparently and to avoid their dissipation through corruption. Considering the record of the Indonesian government, this is a very reasonable concern. Nevertheless the ability of NGOs to use these funds efficiently needs to be seen (Soesastro and Ace 2005). The Indonesian central government also responded appropriately to the disaster by announcing at the end of December 2004 that the government would soon release approximately US$ 5 million to support rescue and relief activities. The government also announced the three phase operations that it would conduct in Aceh and Nias: (1) emergency rescue and relief operations, (2) rehabilitation and reconstruction of basic socio-economic infrastructure, law and order, and (3) rebuilding the economy and governmental system. The first phase was completed by April 2005. The second phase has been conducted since April this year and is expected to last for around two years. The third phase will involve around three to five more years. The Indonesian National Planning and Development Agency (Bappenas) was responsible for developing blueprints for the second and third phases. The 2005 government budget allocated including funding received from international agencies for Acehs rehabilitation and reconstruction is approximately US$ 880 million (Kompas 27 August 2005), and in 2006 will be approximately US$ 960 million. Over 5 years, the total government budget for Acehs reconstruction, including government loans, will expected to be around US$ 4.1 billion; i.e. almost 100 per cent of the total damages and losses in Aceh (Tempo Interactive 27 March 2005). The World Bank predicted that the composition for the whole rehabilitation and reconstruction activities until 2009 will be (1) around US$ 2.5 billion from domestic sources through the government budget, (2) around US$ 2.5 billion from foreign governments, and (3) another US$ 2.5 billion from private sectors and NGOs. The total amount expected is bigger than the total estimate of damages and losses reflecting the intention to build a better Aceh and Nias (World Bankb 2005) Hence, in general, both domestic and international immediate responses to the Asian tsunami were fast and tremendous, both in physical rescue and relief activities and in committing to provide funding for rehabilitation and reconstruction. The challenge then became how successful the actual rehabilitation and reconstruction activities would be, and how good the coordination among agencies, namely among various government agencies, among various NGOs and between government agencies and NGOs. As mentioned before, NGOs roles are very important since significant international funding was channeled through them. Certainly, good coordination between the government and NGOs is needed to be able to efficiently reconstruct Aceh and Nias.

4.3. Initial Challenges

In early 2005, there were several concerns regarding the process of rehabilitation and reconstruction in Aceh and Nias. The first challenge discussed was of coordination. The national government had appointed Bappenas as the central agency for developing the recovery planning for the tsunami affected areas in Aceh and Nias. The main challenge for Bappenas was to develop a master plan that satisfies all


agencies and organisations involved in the reconstruction process. At the time, dialogue between Bappenas and local governments was rather limited. In the absence of their direct involvement, many local governments feel that they are alienated in the reconstruction process, which is basically dictated by the central government. Consequently the local government may want to design their own plan and programs, which may be incompatible with the Bappenas plan, leading to duplication of activities and inefficient utilisation of funds. There was also poor coordination of plan activities between NGOs and Bappenas. Many NGOs are highly likely to resist going by plans emanating exclusively from Bappenas. Several consortiums of NGOs developed their own reconstruction programs for Aceh and Nias. It was not yet clear how they were going to relate these plans to those of Bappenas or local governments. Coordination among (domestic and international) NGOs was also problematic. First of all, there were so many of them. There were more than a hundred international NGOs in Aceh alone. Second, many of these NGOs had a high turnover of staff, some working only as long as two weeks. The new staff did not know what had been agreed upon in the previous NGO coordination meeting. This situation hardly contributed to coordination and effectiveness of rehabilitation and reconstruction activities (Saldanha 2005). The national government preferred to establish a new special agency to be the coordinator of the implementation of the recovery activities. Local governments, communities and business as well as NGOs were not so keen on this idea. They were afraid that this new agency would constrain their involvement in rehabilitating and reconstructing Aceh. They were also suspicious that all construction would be tendered in Jakarta and won by few large construction companies connected to highranking officers in the central government; and the implementation of these construction activities would be conducted without appropriately meeting the needs of local people. Clearly local people and NGOs demanded a more decentralised approach in rehabilitating and reconstructing Aceh that they believe will be able to better accommodate local needs (Athukorala and Resosudarmo 2005). The second challenge related to security conditions in Aceh. The ongoing political conflict with the 30-year-old secessionist rebellion of GAM had complicated the first phase of the operation; i.e. rescue and relief activities, in Aceh causing these activities to take much longer than in other tsunami affected countries. There were some worries that the ongoing political conflict would also hamper the rehabilitation and reconstruction operations. Another important challenge was to make sure that all or most commitments by international donors would materialise in a timely manner. Some of the commitments may not translate into actual fund flows for various reasons beyond the control of Indonesia. However, domestic aid absorption capacity pays an important role. It is important that the Indonesian government and NGOs maintain effective communication with donors, and engage donors in developing projects/programs to minimise the mismatch between donors interests and reconstruction priorities (Athukorala and Resosudarmo 2005).


The final challenge related to whether or not the rehabilitation and reconstruction of Aceh and Nias would take into account the need for an integrated system of future disaster prevention, detection, early warning system and mitigation. International responses were not always that generous. Hence, in general, would Indonesia develop a more solid disaster management procedure and institution?

4.4. Rehabilitation and Reconstruction

Central government seemed to understand the need and demand for better coordination with local governments and NGOs as well as a more decentralised system in rehabilitating and reconstructing Aceh. From March 2005 onwards, Bappenas conducted intensive consultations lasting several weeks with community and political leaders in the affected areas as well as various NGOs and donors. Syiah Kuala University in Banda Aceh was given support to organise inputs from local communities and NGOs while central and local government line agencies provided strategic and technical expertise. In the meantime, donors were encouraged to contribute a great deal of technical assistance and valuable suggestions. A Master Plan resulted, which is both comprehensive and detailed, though the central government recognises that no one plan can address every issue or cover every eventuality. It agrees that much will change and evolve as the huge rehabilitation and reconstruction program gets underway; i.e. no strict blueprint approach was adopted for the rehabilitation and reconstruction of Aceh (Indrawati 2005; World Bankb 2005). For example, now communities are provided with opportunities in decision-making about where, how and by whom houses and other buildings are to be reconstructed. The central government only makes sure that principle infrastructures such as main roads, electricity and water sanitation facilities will be available. Also, earlier there were plans called for tough zoning, mandatory setbacks from the sea, relocation of local markets etc. These plans were not implemented. People in Jakarta understood that local people affected knew better in making such decisions (Sen and Steer 2005). Strong conflict between central government, on one hand, and local government, communities and business as well as NGOs, on the other, was reduced to a minimum. This situation is a promising one, where central government provides more opportunities for other regional stakeholders; i.e. local government, local communities, local business and NGOs, in developing a development plan and in implementing it. If the rehabilitation and reconstruction turns out to be successful, there is hope that this pattern of strong coordination and collaboration among stakeholders would be the blueprint for future regional development in the country. The central government decision to set up a special Aceh-Nias Rehabilitation and Reconstruction Board (the BRR, or Badan Rehabilitasi dan Rekonstruksi AcehNias), as a one-stop shop for the coordination of all agencies and donors in Aceh and Nias did not received any strong objection from local governments, communities, NGOs


and international donors. The two main reasons for this are the following. The first is that the central government had shown its willingness to collaborate with local governments, communities and NGOs as well as with donors in developing the plan, and its willingness to be flexible in implementing the plan. The second is that the person elected to head this agency as well as the deputies has the reputation of being honest and capable. An Advisory Board consisting of six ministers, heads of local governments and local leaders was established to ensure strong support from various stakeholders in Aceh. An independent Supervisory Board consisting of prominent Indonesians was also set up to monitor and audit the entire reconstruction program; making sure that the BRR will work efficiently and without corruption (World Bankb 2005). Central government also seemed to understand that, to be able to effectively rehabilitate and reconstruct Aceh, the 30 years of conflicts with the GAM should be ended. The GAM, on the other hand, seemed to take the same view in this case. On August 15, the government of Indonesia signed a peace agreement with the GAM. Under this agreement, by the end of 2005, the government should have significantly reduced its military and police presence in Aceh and GAM members should have handed over their weapons. GAM members will cease their attempts to separate from Indonesia, in return for political, economic and social rights. Political rights include the right to form local parties, stand for election, and participate in the rehabilitation and reconstruction of Aceh. Since the signing of this agreement, the incidents of arm conflict between GAM and Indonesian army have been significantly declined (World Bankb 2005). Nevertheless the progress of reconstruction activities had so far been very slow (World Bankb 2005). The efforts to accommodate local needs in the plan and properly setting up the BRR were taking time. The Ministry of Finance was criticised for being slow in disbursing government budgets for rehabilitation and reconstruction activities in Aceh. Some personnel in line ministries (such as in Ministry of Public Works) who in general would be responsible in providing infrastructures felt marginalised with the establishment of the BRR and were reluctant to work hard, particularly after seeing staff in the BRR received much higher salaries. In addition, many international donors only obtained authorisation from their own parliaments for reconstruction funds in the middle of the year, and were only ready to disburse funds after that. Some donors (such as Japan, some European countries, and the multilateral agencies such as the World Bank and ADB) prefer to distribute their funds through Indonesian government budget systems. Also, the Indonesian budget year starts in January 1, hence these funds will only be cashed in the new budget year 2006 (Sen and Steer 2005). By the end of September, it was estimated that around 7 thousand houses have been rebuilt, while more than another 100 thousand are needed. Reconstruction of necessary infrastructures such as roads, bridges, electricity and drinking water facilities are also very limited. Although collaboration among government agencies, communities, NGOs and donors has been relatively well established there was strong pressure for organizations to maintain the same staff in Aceh for at least a month and to make sure that full information be transferred from staff leaving Aceh to those coming in this coordination is not yet at a level enabling fast housing reconstruction (World Bankb 2005; Kompas 17 October 2005).


Community driven mapping of who owned which land parcel (almost all land records were destroyed) has now been completed in almost all the thousand villages devastated by the tsunami, and around US$600 million has been committed by NGOs and donors for housing, so it is likely that the pace will accelerate and that more than a thousand houses per week will be rebuilt throughout 2006. It is also believed that over time the BRR will lead to greater effectiveness, with greater funds will being smoothly disbursed in the year 2006 and thereafter (Sen and Steer 2005). What remains a big question is whether or not the rehabilitation and reconstruction of Aceh and Nias will take into account the need for an integrated system of future disaster prevention, detection, early warning system and mitigation, and whether or not Indonesia will develop a more solid disaster management procedure and institution (Salim et al. 2005).

5. Conclusion
This paper has analysed the impact of the Asian tsunami on Indonesia. The major problem in conducting this analysis lies in obtaining accurate data and information regarding this issue. Accurate data on Aceh and Nias, even if available, is difficult to get and the quality is debatable. Several agencies provided their estimates on the impact of this Asian tsunami on Indonesia. However, assuring that these estimates are reliable is difficult. Various institutions produced reports on what has been going on in Aceh, however some of these reports are conflicting. Discerning the correct information is sometimes difficult. Nevertheless, after taking into account difficulties in preparing this analysis, several conclusions that can be drawn are the following. First, the Asian tsunami has killed thousands and affected almost a million people in Aceh and Nias. The majority of deaths were of women and children. In several villages, almost all of their members were killed. In many villages, all of their members were affected. Houses, roads, electricity and other infrastructure in the northern and western part of Aceh and surrounding islands were heavily destroyed. Agriculture, particularly the fishery sector, is the most affected sector. The impact of the Asian tsunami on local economy is significant and very serious, with the main concern being the increasing percentages of poor people and unemployment in Aceh and Nias. The impact on the national economy on the other hand is most probably small. Second, emergency rescue and relief activities as well as outside responses were considered to be overwhelming. Although the rescue and relief activities were slow in the first couple of days after the event due to limited information, they quickly accelerated after that. Around 250 domestic and international agencies were involved in various rescue and relief activities. It is safe to say that they were able to complete the rescue and relief operations around April 2005. International commitments to provide funding to support various relief, rehabilitation and reconstruction activities were also quick and pleasing. Never has there been such a large amount of recovery funding allocated to a natural disaster event in Indonesia. Another feature of this funding is that the majority of it will be disbursed through NGOs, requiring close collaboration between the Indonesian government and NGOs to make the


reconstruction effective, and hopefully avoiding the dissipation of this funding through corruption. Third, the central government ended up choosing a smart approach by allowing local communities, leaders and NGOs to participate significantly in the development of the master plan to reconstruct Aceh and Nias. The central government also agreed that the master plan will flexible, providing opportunities for communities to make decisions about where, how and by whom houses and other buildings are to be reconstructed. Thus, better collaboration among stakeholders could be established. If the rehabilitation and reconstruction turns out to be successful, this pattern of strong coordination and collaboration among stakeholders could be the new paradigm for future regional development in the country. Fourth, the tsunami devastation has pushed the central government and the GAM to come up with a peace agreement. Hence, although so far the pace of rehabilitation and reconstruction in Aceh and Nias has been slow due to the time needed to provide opportunities for the locals to be involved extensively in the planning and reconstruction activities, and to establish the peace agreement with the GAM, there is a good chance that the pace will increase significantly next year and thereafter. Fifth, natural disasters are a frequent event in Indonesia and there are signs that they will occur more frequently. Some could be as, or even more, damaging than any of the previous ones. It would be wise for Indonesia to be ready. Indonesia should develop strong and solid systems and institutions of natural disaster prevention, detection, early warning and mitigation. This could start with conserving coastal ecosystems, introducing simple natural disaster detection, early warning system and mitigation procedures such as the one that exists on Simeulu island and making it embedded in the national elementary education program, and, later on, providing modern monitoring technologies. Indonesia should develop a more solid disaster management procedure and institution as well as establishing a significant emergency fund for natural disaster events, as future international response might not be as generous as in the case of the Asian tsunami. So far evidence of significant steps in dealing with these issues is difficult to find.

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Association of Vulcanology and Chemistry of the Earth's Interior (IAVCEI) General Assembly, Bali, 17-22 July. DepSos (Indonesian Department of Social Services). 2005. Perkembangan Korban Bencana NAD dan Sumut. 15 January, Jakarta. FAO (Food and Agricultural Organization). 2005. Special Report: FAO/WFP Food Supply and Demand Assessment for Aceh Province and Nias Island (Indonesia), 5 May. ( Indrawati, S.M. 2005. Toward Recovery: Lessons from Indonesian Case in Managing Natural Disaster Crisis. Keynote speech in the 7th IRSA International Conference on Natural Disasters Impact and Challenges for Recovery, Jakarta, 34 August. LPEM-FEUI (Institute for Economics and Social Research-Faculty of Economics University of Indonesia). 2005. Perhitungan Kebutuhan Dana Pembangunan Kembali Aceh. LPEM Internal Report, Jakarta. Montgomery, R.D. 2005. Who will Live and Who will Die in The Next Sumatra Tsunami? Do Natural Resource Maps Provide the Answer? Paper presented in the 7th IRSA International Conference on Natural Disasters Impact and Challenges for Recovery, Jakarta, 34 August. Office for the Coordination of Humanitarian Affairs (OCHA). 2005. Indian Ocean INDIAN OCEAN - Earthquake/Tsunami - December 2004: List of commitments/contributions and pledges as of 21-February-2005. (

Saldanha, J.M. 2005. Twin Challenges of Post-Tsunami Aceh, Indonesia: Can PostConflict Reconstruction Go Together with Post-Disaster Reconstruction? Paper presented in at the Workshop on Post-Tsunami Asia, Oxford, 11 June. Salim, W., C. Chan-Halbrendt, and B. Alexander. Effective Disaster Recovery Planning: Assessing the Government of Indonesia Plan Using a Synthesized Disaster Risk Management Framework. Paper presented in the 7th IRSA International Conference on Natural Disasters Impact and Challenges for Recovery, Jakarta, 34 August. Sen, K. and L. Steer. 2005. Survey of Recent Development. Bulletin of Indonesian Economic Studies, forthcoming. Soehaimi, A., E.K. Kertapati, Surono, Supartoyo, and J.H. Setiawan. 2005. Gempa Bumi dan Tsunami NAD-SUMUT 26 Desember 2004. Paper presented in the GeoSeminar, 14 January, Pusat Penelitian and Pengembangan Geologi, Bandung. Soesastro, H. and R. Ace. 2005. Survey of Recent Development. Bulletin of Indonesia Economic Studies, 41(1): 5-34.


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Table 1. Natural Disaster Events in Indonesia 19072005

Number of events Drought Earthquake Epidemic Famine Flood Slides Volcano Wave / Surge Wild Fires Wind Storm Total Average per event Average per year 11 80 31 3 94 32 44 7 8 10 320 3 Number of people Killed 9,329 23,543 3,476 260 4,340 1,748 17,945 167,050 63 1,992 229,746 718 2,344 Number of people affected 4,894,220 1,663,206 653,693 162,000 5,145,760 339,337 951,242 2,000 3,034,000 18,715 16,864,173 52,701 172,083

Source: EM-DAT: The OFDA/CRED International Disaster Database Universit Catholique de Louvain Brussels Belgium. Note: Epidemics included: Plague (Bubonic), Diarrhoeal/Enteric (Cholera), Malaria, Diarrhoeal/Enteric, Arbovirus (Dengue fever), Anthrax, Diarrhoeal/Enteric (Acute diarrhoeal syndrome), Rabies, Diarrhoeal/Enteric (Shigella suspected), Respiratory (Acute respiratory syndrome including SARS), and Arbovirus (Dengue).


Table 2. Regional Distribution of Victims

Region Aceh Province 01. City of Banda Aceh 02. District of Aceh Besar 03. City of Sabang 04. District of Pidie 05. District of Bireun 06. District of Aceh Utara 07. City of Lhokseumawe 08. District of Aceh Timur 09. City of Langsa 10. District of Aceh Tamiang 11. District of Aceh Jaya 12. District of Aceh Barat 13. District of Nagan Raya 14. District of Aceh Barat Daya 15. District of Aceh Selatan 16. District of Simeulu 17. District of Aceh Singkil 18. District of Aceh Tengah 19. District of Aceh Tenggara 20. District of Gayo Lues 21. District of Bener Meuriah North Sumatra Province 01. District of Nias 02. District of Nias Selatan 03. District of Tapanuli Tengah 04. District of Serdang Bedagai 05. District of Mandailing Natal Number Number of Total Percentage Population of People People People People Killed Lost Affected Affected 4,104,187 120,663 269,091 78,417 306,718 58 27,447 18 517,452 4,646 350,964 1,488 395,800 2,217 156,478 394 253,151 224 141,138 n.a. 238,718 n.a. 111,671 19,661 97,523 11,830 152,748 493 153,411 835 167,052 6 76,629 22 174,007 73 158,641 192 168,034 26 67,514 27 120,000 36 1,888,707 422,170 275,422 272,333 549,091 369,691 240 233 1 1 4 1 116,126 64,552 43,902 108 2,091 58 233 11 n.a. n.a. n.a. 77 2,911 865 n.a. 1,086 1 4 227 n.a. n.a. n.a. 24 24 n.a. n.a. n.a. n.a. 714,517 182,478 141,907 4,529 71,350 17,279 22,816 20,564 13,934 10,370 3,100 60,120 93,558 16,127 14,799 17,290 18,167 183 4,653 26 27 1,240 4,266 4,257 1 1 6 1 17.4% 67.8% 46.3% 16.5% 13.8% 4.9% 5.8% 13.1% 5.5% 7.3% 1.3% 53.8% 95.9% 10.6% 9.6% 10.4% 23.7% 0.1% 2.9% 0.0% 0.0% 1.0% 0.2% 1.0% 0.0% 0.0% 0.0% 0.0%

Source: Bakornas PBPa, 2005)


Table 3. Estimated Damages

Items Housing Schools Hospital and Health Centres Roads and Bridges Irrigation Agriculture and Livestock Fisheries Enterprises Environment Governance and Administration Others Total World Bank's Estimate Private Public Total (US$ million) 1,408.4 9.0 23.2 165.8 132.1 194.7 508.5 428.9 548.9 n.a. 41.9 3,461.4 (US$ million) 28.7 119.4 68.6 370.1 89.1 29.9 2.5 17.7 n.a. 89.1 175.0 990.1 (US$ million) 1,437.1 128.4 91.8 535.9 221.2 224.6 511.0 446.6 548.9 89.1 216.9 4,451.5 LPEM-FEUI's Estimate (in percentage of pre-disaster levels) 26.9 30.4 30.0 24.0 33.3 31.7 24.9 24.9 32.4 40.0 70.0 27.4-27.9 28.3 26.9 n.a. 4.6 (US$ billion)

Note: a = FAOs estimate Sources: World Bank (2005) and LPEM-FEUI (2005)


Table 4. Acehs Economy Pre-Tsunami

1971 GDP (including Mining) GDP (in 1983 Rp billion) (in %age of national GDP) GDP/Cap (in 1983 Rp thousand) (in ratio with national GDP/Cap) Share of GDP Agriculture (in %age of GDP) Manufacturing (in %age of GDP) Service (in %age of GDP) Poverty

1983 3,425.2 4.8 1,204.8 2.7 16.9 69.6 13.5 11.6 15.1
a a

1996 7,055.6 4.1 1,788.4 2.1 20.4 60.8 18.8 6.3 11.3

2002 5,707.2 3.1 1,418.8 1.7 28.2 44.5 27.4 29.8 18.2

452.1 1.5 224.9 0.9 61.7 14.5 23.8 n.a. n.a.

%age of poor people %age of national poor people

Source: BPS (various years) a = the numbers are for 1990. b = using the BPSs poverty lines


100 80 60 40 20 0 1951-1960 1961-1970 1971-1980 1981-1990 1991-2000 2001mid2005

Source: EM-DAT: The OFDA/CRED International Disaster Database Universit Catholique de Louvain Brussels Belgium.

Figure 1. Frequency of Natural Disaster Events


14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 -2.00 Nov- Dec- Jan- Feb- Mar04 04 05 05 05

Apr- May- Jun05 05 05


Aug- Sep- Oct05 05 05

Inflation in Indonesia
Source: CEIC Asia Database

Inflation in Banda Aceh

Figure 2. Monthly Rates of Inflation


Map 1. Acehs Districts and the Earthquakes Epicentre


Source: Digital Globe (

Picture 1. Northern Part of the city of Banda Aceh: Before and After the Tsunami