ACEH TRANSITION ISSUES

UNCLAS SECTION 01 OF 02 JAKARTA 002623 SIPDIS SIPDIS SENSITIVE DEPT FOR EAP/MTS AND EEB/IFD/ODF USAID FOR ANE/AA WARD E.O. 12958: N/A TAGS: EAID EINV PGOV PREL ID SUBJECT: ACEH TRANSITION ISSUES ¶1. (SBU) Summary: On September 17, the Ambassador and Chiefs of other donor missions assessed Aceh's transition from the reconstruction period to economic growth. The mandate of the Rehabilitation and Reconstruction Agency for Aceh and Nias (BRR) expires in April 2009. Donors work closely with local governments and transition teams to ensure they can deliver services and infrastructure when reconstruction projects end. Donors are committed to support a successful democratic transition in Aceh, and are working with BRR and Governor Irwandi to clarify roles and define priorities for the post-reconstruction phase. ¶2. Summary - Continued. Some donors expressed concern that ex-GAM fighters could still pose a threat to stability by failing to integrate, and by engaging in illegal activities. Private sector activity needs to be robust enough to carry Aceh through the post-reconstruction phase with sufficient employment and growth. The consensus was that Governor Irwandi needs to do more to manage Aceh's transition and plan for the post-BRR phase. End Summary. Changing the Paradigm: Aceh as "Fragile" -------------- ¶3. (SBU) At a working lunch with donors on September 17, the Ambassador asked guests what the future holds for Aceh, especially the transition period after reconstruction donors leave. He reiterated the U.S. commitment to work collaboratively with the donor community towards sustained development noting that we still have time to seize the opportunity to help Aceh succeed. An Australian government representative noted that Australia had changed the paradigm and has assigned "fragile" status to Aceh. The worst outcome would be to have a situation in which low-level violence hurts economic growth prospects. Other donors added there is still an imbalance and perceived inequality in resource distribution between tsunami-affected districts and those with former GAM fighters. A donor and local government culture of constructive engagement with the former GAM fighters can help avert renewed violence. Targeting the Transition -------------- ¶4. (SBU) A member of the United Nations Office of the Recovery Coordinator for Aceh and Nias (UNORC) stated that Aceh's transition teams do not yet have a clear understanding of their role and donors need to work more closely with them as the post-reconstruction phase nears. The World Bank-initiated Multi-Donor Fund for Aceh reconstruction is considering extending its term to 2012 to assist with the post-reconstruction transition phase. It has $160 million in uncommitted funds that will be programmed to support this transition. The donors welcomed a recent proposal to establish a $50 million economic support facility targeting employment in fisheries and other agri-businesses. Need for Community Infrastructure -------------- ¶5. (SBU) Aceh's local governments have to learn effective methods to deliver basic municipal services such as water and electricity. In many cases there is still no functioning community infrastructure: some school and hospital buildings are empty shells with no staff, power or water. Transition of existing assets also requires training and resources. In one case, the local government has stated it does not want to run the Kuwait-built desalination plant because it is too expensive. BRR is working with local governments and has presented a transition plan, but it is not clear that local government's have the technical and human resource capacity to take over effectively when BRR's mandate expires in April 2009. Governor Needs Clear Vision -------------- ¶6. (SBU) The donors have so far been the main implementers but it JAKARTA 00002623 002 OF 002 will soon have to be the local governments. The new Governor has not yet matched budgets with plans and his vision for the transition phase is unclear. A representative of the European Commission complained that, Governor Irwandi is asking everybody for money and advice but not stating his priorities. A representative of the German Technical Assistance Agency (GTZ) noted that there is still mistrust between the old government machinery and Governor Irwandi, and the need for more local officials to work together. The Japanese Ambassador expressed concern that the central Government of Indonesia may be losing the focus on Aceh. Aceh is not yet a success story and ex-combatants could turn to illegal activities such as drug trafficking if economic and political stability are not supported. Many former GAM fighters are not involved in the planning and coordination process and do not care to be, Ambassador Hume noted. Private Investment? -------------- ¶7. (SBU) While attracting investment is a priority of the Governor, much of the economy is still agriculture-based. A representative of the United Nations Development Program noted that there is not yet a real private sector, just a lot of contractors working on reconstruction. Donors and the private sector need to do more to encourage commercial activity. The UNORC representative believes that donors in general need to continue to raise Aceh in discussions with GOI Ministries so that it does not fall off the radar screen. The Ambassador concluded the meeting by noting that the donors are providing productive assistance and that our Aceh partners get a passing grade. The main challenge ahead is to encourage local leadership and build local capacity. HUME