Aceh: Capacity-Funding Gap Threatens Long-Term Transition

UNCLAS JAKARTA 000225 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: Capacity-Funding Gap Threatens Long-Term Transition Ref: A) 07 JAKARTA 2623 - Aceh transition issues; B) 07 JAKARTA 3219 - Aceh budget ¶1. (SBU) Acehnese government capacity is severely limited and is insufficient to absorb the central government budget allocations, according to Minister for State-Owned Enterprises and former Aceh peace negotiator Sofyan Djalil. In a January 29 meeting with the Ambassador, Djalil said that this capacity-funding gap threatens Aceh's longer-term development and undermines the provincial government's ability to deliver key public services. (ref A). ¶2. (SBU) Limited government capacity, not insufficient revenue, is the key issue for Aceh, according to Minister Djalil. The capacity-funding gap in Aceh is due to the poorly functioning bureaucracy in Aceh. Djalil regarded Governor Irwandi as a smart man, but noted that his institutional capacity is weak. ¶3. (U) Aceh provincial government revenue is growing rapidly. Despite massive needs, the government is unable to spend the funds properly. In 2007, the provincial budget was $411 million (ref B). Aceh was only able to spend around 75% of the budget. Difficulty with budget execution is expected to worsen this year because provincial government revenues will double in 2008 to more than $850 million. There are several reasons for the explosive growth in revenue, most notably the special autonomy fund designed to finance provincial development as well as Aceh's entitlement to a greater share of central government revenues generated within the province. The special autonomy funds are to be used to pay for infrastructure and development programs over the next 20 years. Sofyan Djalil Bio Note -------------- ¶4. (U) Minister Djalil was the State Minister for Information and Communication when the Helsinki Peace Accords were signed. He and Hamid Awaludin were the two Indonesian negotiators of the Helsinki MOU. Djalil also played a key intermediary role for the President and Vice President during the Aceh Monitoring Mission and was a key interlocutor with GAM members. Governor Irwandi and many senior GAM members trust him. Minister Djalil was born in Aceh, but left in ¶1976. Many observers view Djalil as among the most reform-minded members of SBY's Cabinet.