Nurdin Hasan, Banda Aceh – After the economic boom from rebuilding projects in the wake of the 2004 earthquake and tsunami, growth in the non-oil and gas sectors in Aceh has dropped as reconstruction activities draw to a close.
The World Bank released this conclusion in data made public on Wednesday in Banda Aceh.
The Aceh Economic Update report was compiled by the World Bank and Bank Indonesia, supported by the Multi-Donor Fund, a consortium under the World Bank tasked with collecting funds from donor countries for post-tsunami reconstruction in Aceh and Nias.
World Bank research analyst Harry Masyrafah said Aceh's non-oil and gas gross domestic product growth had dropped to 1.9 percent in 2008, far below the national figure of 6.5 percent.
"Sectors related to the reconstruction process, which has been the driving force behind [Aceh's] economic growth since 2005, now show limited or negative growth," he said before an audience of about 100 government officials, economic experts and journalists.
The Aceh economy enjoyed a boom during the four years of reconstruction, as large sums of money poured into the province leading to a high employment rate.
From 2005 through 2008, at least Rp 60 trillion ($6 billion) was allocated to Aceh. As the reconstruction process winds down, related sectors including construction and transportation have shown deceleration or negative growth.
Masyrafah said the Aceh economy was still propped up by revenues from the oil and gas sectors, but a reduction in gas output on Aceh's eastern coastline has hurt the bottom line.
According to data from the Ministry of Energy and Mineral esources cited by the World Bank, Aceh gas production in 2008 was 231 million cubic feet, 17 percent lower than in the previous year.
"The drop in oil and gas production has shifted the economic structure in Aceh so that trade, services and transportation are bigger contributors," Masyrafah said.
The agricultural sector, which was expected to be the motor behind the growth of alternative sectors after the reconstruction phase, has not been able to maintain its previous year's growth.
After increasing by 3.6 percent in 2007, almost on par with the national figure, the agricultural sector in Aceh dropped to 0.8 percent growth in 2008, far less than the 4.2 percent gainnationwide.
"The growth was slowed by massive floods, pests and the transformation of agricultural land into residential areas," Masyrafah said, adding that he hoped the government would give the sector more attention.
He said domestic spending had continued to be the force that kept the economy moving. Spending continued to increase in 2008, though not as sharply as in the previous years.
As in other regions in the country, the report said consumer spending contributed the most to the economy, mitigating the impact of the global crisis.
Transfers of large sums of money from the central government and the high amount of public savings after the reconstruction phase had helped boost consumer spending, though economic growth in the province was lower.
"Despite the continuous effort to boost economic growth, there was a significant drop in the second half of 2008. This will affect Aceh's economy in the future, as the reconstruction process ends, [especially] with the global financial crisis," Masyrafah said.
Aceh Governor Irwandi Yusuf, in a speech read in his absence, said reconstruction efforts and the peace treaty between the government of Indonesia and the Free Aceh Movement (GAM) in August 2005 had given the province a chance for economic recovery.
"The post-conflict and post-reconstruction economy in Aceh faces a lot of challenges while enjoying a number of opportunities at the same time. Opportunity arises as the Aceh people are once more becoming [economically] active, in addition to investments, which I hope will continue to increase," he said.
The World Bank update, Yusuf said, showed that the structure of the Aceh economy had undergone significant changes in the past several years. In the future, both private and government investment will play a crucial role in growth in Aceh, he said.
"Several initiatives have been introduced, including the one-roof permit service, business loans for small enterprises and ensuring security in Aceh to encourage investments," he said.