Beware the Recovery Economy? There’s A Lot to Learn from Aceh

If you haven’t yet read the Guardian’s ‘Secret Aid Worker: Two Years After Haiyan, the Aid Economy is Flourishing,’ you really should here. We agreed with nearly every word on the page, particularly the main arguement: ‘Economic development (during disaster recovery) is not a direct result of NGO projects or government initiatives. It’s been a more indirect consequence. The mass influx of international organizations, with international staff, has injected cash into Tacloban city. Snazzy boutique hotels, cafes and Italian restaurants have sprung up serving expats and the middle class (working for those NGOs and international organizations).’ In a nut shell, they argue that recovery is a quick ‘path to cash’ for the local community, absent proper local economic development – based on a strategy and plan. They pose a number of questions about what happens ‘after’ – after recovery is complete and there are no more high paying NGO or international organization jobs; after all of the international humanitarian staff leave and take their disposable income with them; when the hospitality sector no longer has international staff on nice per diems arriving daily. What happens then? The author argues that ‘Leyte (Tacloban) is an aid experiment’ – one to keep an eye on when the funding stops. It is on this point – and this point only – that we disagree. Aceh, Indonesia, was the ‘experiment’ – the largest ever – during the 2004 Indian Ocean tsunami recovery. These are our answers to your questions.

What happens when funds disappear and donor attention shifts?

So many people who benefitted from recovery were not ready for life ‘after’ because they had not thought ahead – their life ‘before’ focussed on daily and weekly needs, with little thought to longer term financial planning. In some cases people are worse off than before the disaster – before the disaster they made their income as shop owners or farmers, but the opportunities and elevated income and ‘status’ experienced during recovery has made them reluctant to return to their former livelihoods, with the feeling of taking a ‘step backwards.’ Those who sold off their original income generating assets – their shops or farms – were also forced to sell off the luxury assets they accumulated (cars, property) once the recovery jobs ended in order to meet daily needs – which is often not enough capital to restart their former business.

Will fancy hotels really be necessary when NGO managers with travel stipends stop visiting?

The funtion of hotels and the entire catering/hospitality sector adjusts. Recognizing the need to safeguard hospitality investments for future growth in tourism, such as good quality hotels, the provincial government works with hotels to provide accomodation and venues for government trainings of civil servants coming from outer districts. The hotels also open their facilities to the public – for a small fee people can use the pool or fitness centre.

In Aceh, coffee is the base of the economy – with uncountable cafes used by expats and Acehnese alike. During recovery, the purpose of cafes was to serve coffee, now, with far fewer aid workers partaking of the local delicacy, cafes have diversified their services to include free internet amd meeting rooms. There are also partnerships opening with nearby restuarants to serve snacks and light meals. Local buisness – that which was the foundation of the local economy before the tsunami – continues to thrive. Acehnese did not try to be something that they were not. They are not Starbucks or the Outback Steakhouse. They are local cafes serving local coffee with good local food at local prices. Certainly some business practices were adjusted to accommodate the influx of expats (take-away coffee, anyone?) But overall local business did not fall over itself to serve the whims of a few (big spending, to be sure) customers.

People who invested in property and transport, however, have felt the absence of international organizations and NGOs. Rental prices for housing skyrocketed with the demand following the tsunami, so much so that housing was five to six times the price compared to housing in Jakarta. With the drop in demand, property owners are hurting. So too are those who invested in rental vehicles. But, as in any economy, there will be winners and losers based on supply and demand. Adaptation is critical. Some learn quick while others take longer to learn and adapt.

Will local people be willing to pay 5 times the sum of a normal meal for an American-style breakfast?

Basically, no. Those businesses which catered to expat dining needs have more or less gone out of business, but there were few to begin with. As mentioned above, existing local businesses such as cafes and small ‘warungs’ – small restaurants serving local fare to locals and expats alike at local prices – was a way of life before the tsunami, they have sustained and thrived ever since.

When international cash evaporates, so too will jobs for the middle class. And what about the people who have migrated from rural areas to the cities like Tacloban to profit from this growth? What about their livelihoods ‘after’?

Three trends emerged in Aceh. People from the government bureaucracy who were involved in recovery (at the national level) returned to their respective positions but with significantly improved skill sets – to international standards – and have been promoted to senior positions and have a positive impact on the quality of governance in the province. This is a valuable asset for the Aceh government (specifically politicians) to implement their future development plans.

People who worked in NGOs also improved their skill sets – good understanding of planning, implementation and monitoring that now serves them well in local and provincial government. Others have benefitted from improved English language skills and are employed in the private sector. Others moved on to national government or private sector in other parts of Indonesia while others still have developed their careers with NGOs or international organizations such as the EU or UN and now serve as international staff in other countries – taking their experiences of Aceh’s recovery with them and applying lessons in places as diverse as Afghanistan, Nepal, Vanuatu and yes, even Leyte.

And then there is the private sector – which probably went through more upheaval, both positive and negative, than the government. Before the tsunami, local governments had to use contractors from Banda Aceh or from other provinces as local companies did not have the knowledge or assets to undertake contracts. During the recovery process there was such demand for construction works that there was no option but to use local companies, and many new ones formed as well. With the experience of the recovery behind them, there are now companies in all districts with the capacity to enter into partnerships with local governments which are far more cost effective than in the past. However, with the reduced demand for reconstruction works, there was an oversupply of contractors throughout the province. This lead companies into competiton for contracts, and has weaned out under-perfoming companies, leaving the best to build up their businesses. Those who have lost out have had to adapt – return to old jobs or find new opportunities. As we noted above, supply and demand produces winners and losers in all economies and adaptation is necessary for survival.

Disaster recovery results in what we like to call a ‘false economy’ – a time limited construction boom-based economy. The scale of growth doesn’t last – and yet those who are benefitting from from this ‘boom’ often fail to remember that.

Aceh survived on the recovery economy for nearly 10 years. While many economic developmemt strategies were developed by multiple actors, none were ever truely implemented. The key factor that separates Aceh from Leyte is that Aceh is also a post-comflict economy. The influx of disaster recovery money also served as instant peace dividends for nearly everyone in the province. And then the real peace dividend kicked in – Special Autonomy funds from oil amd gas revenue. Until recently, Aceh could survive without a proper economic development strategy due to the disposable income generated by recovery employment opportunities and donor funds circulating through its economy. The challenge now will be for the government to recognize that it is time to put the oil amd gas money to use to stimulate the economy so that people who were not prepared for ‘after’ do not become secondary victims of the tsunami 11 years on.

Moreover, the Aceh government is faced with an increasing wealth gap – those that continue to benefit from residual recovery activities and oil amd gas income (basically, those people well placed in the government) and the majority of the population who do not. Acehnese people got a taste of a different life after the tsunami (and 30 years of conflict) and while many are not so naive as to believe that it is necessarily their due, they also need the government to step in to stimulate the economy so that people have opportunities for income growth and improved standards of living. The government also needs to have a strong sustainable development strategy and plan to safegurad the results of the USD 7 billion in recovery investments (assets, human resources), and ensure that the oil and gas money (which is not infinite) is used for capital investments to leverage sustained economic growth and quality public services.

More generally, however, there is also a role for the international community and humanitarian/development sector to play – in Leyte and elsewhere although it is too late for Aceh. There needs to be learning or training programs to help local staff plan for ‘after’ – many are hired by NGOs and other development or humanitarian actors out of necessity and have not previously been in a situation whereby they have disposble income. Buying luxury items is surely on the list of ‘to dos’ but guidance and programs on financial planning or career investment is also critical. It doesn’t need to be bold – taxi driver to mechanical engineer is certainly not the expected route for everyone – but neither does everyone need to pick one of three business opportunities such as constuction contractor, mini mart owner or phone shop owner. Suggestions might include helping staff to invest and grow their existing farms or businesses, or identifyig gaps in the supply chain that they can fill to help the local economy grow – in Aceh the coffee industry has grown immensly with the growth of export-based businesses initiated by recovery veterans.

This is all to say that while no recovery process will be exactly as those that have come before, there are certainly lessons to be learned for communities, governments and the international community on how to soften the blow when the inevitable ‘path to cash’ abruptly takes a downward turn. More study on what Aceh and the Acehnese have experienced is certainly necessary to understand how to go about dealing with recovery economies of massive scale in the future.

Leave a Reply

Your email address will not be published. Required fields are marked *