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Aceh Poverty Assessment
The impact of the Conflict, the Tsunami
and Reconstruction on Poverty in Aceh
Main messages




Poverty increased slightly in 2005 and had declined
to below pre-tsunami levels in 2006, facilitated by
the end of conflict and reconstruction activities;
Poverty in Aceh is a rural phenomenon. A large
number of Acehnese remain vulnerable to poverty
(living just above poverty line);
The abundance of natural resource has not resulted
in higher growth rates or lower poverty levels;
Aceh will have the necessary resources to combat
poverty and promote economic growth, but efficient
allocation of resources is key for success.
Methodology (i)


Two principal data sources: (i) Susenas, a large
scale household survey fielded annually by BPS
in the whole of Aceh and (ii) STAR, special
purpose longitudinal survey re-contacting a
selection of 2004 Susenas households in
tsunami affected areas
SUSENAS records several dimensions of
welfare: household composition, characteristics,
and consumption as well as access to health
and education services
Methodology (ii)


We start with BPS poverty lines in 2004. For 2005 and
2006, to provide a welfare consistent update we: (1)
determine a consumption bundle representative to the
poor in urban and rural areas, (2) apply these
consumption weights to monthly BPS urban price series.
Limitations of this approach: (i) price changes are
measured only in Banda Aceh and Lhokseumawe, so
poverty at the district level might not be accurately
estimated and (ii) small sample size at the district level
makes inferences valid only at the province level
Poverty increased in 2005, but by 2006
had declined below pre-tsunami levels
Aceh
Aceh
Urban
Aceh
Rural
Indonesia
2004
28.4
2005
32.6
2006
26.5
17.6
20.4
14.7
32.6
36.2
30.1
16.7
16.0
17.8
The relatively low poverty increases
in 2005 masks large differences in
tsunami and conflict affected areas
The relative odds of poverty by kecamatan classification of high or low tsunami
and high or low conflict, 2004-06, show that the likelihood of being poor in Aceh
increased significantly in tsunami and conflict affected areas in 2005, but it was
not significant any more by 2006.
High tsunami
Low tsunami
High conflict
Low conflict
2004
0.83**
1.00
1.29***
1.00
2005
1.44***
1.00
1.43***
1.00
2006
1.08
1.00
0.96
1.00
Cumulative Distribution Function for rural Aceh, 2004-06
A large share of the population lives just
above the poverty line – a small shock
can send them below the poverty line
Pre-tsunami, poverty in Banda Aceh
and surrounding districts was
significantly lower…
Poverty increased in many districts in
2005, but decreased in most in 2006
Characteristics of the poor in Aceh are
similar to the poor in other parts in
Indonesia
Household size
Education household head
Household head female
Rural
Agricultural employment
2004
++
-++
++
++
2005
++
-+
++
++
2006
++
-n.s.
++
++
Source: BPS data and World Bank staff calculations.
Note: ++/-- indicates statistical significance at the 1% or 5% level, +/- significance at the 10% level.
Aceh has had slow growth rates for
most of the decade, mostly due to
conflict and declining gas extraction
14
NAD
12
National
10
8
6
4
2
0
-2
-4
1971-75
1976-80
1981-85
1986-90
1991-95
1996-00
2001-04
Aceh’s economy continued to decline
from 2001-05, as the rest of Indonesia
recovered from the financial crisis
10%
1997 Financial Crisis
8%
6%
4%
2%
0%
AvGr86-90
AvGr91-95
AvGr96-00
AvGr01-05
-2%
Aceh
-4%
-6%
Indonesia
Aceh
North Sumatra
Sumatra
As a result, poverty continued to
increase in Aceh while it declined in
most of Indonesia
60
Poverty rate
50
Papua
40
30
Aceh
20
Indonesia
North
Sumatra
10
West Java
Jakarta
0
1993
1996
1999
2002
2004
Poverty growth elasticity in Aceh is one
third of the rest of Indonesia – normal for
economies reliant on natural resources
0
-0.5
% Poverty Growth Elasticity, 1984-99
Aceh
-1
-1.5
-2
-2.5
-3
-3.5
Papua
Riau
East
Kalimatan
Rest of
Indonesia
… availability of oil and gas does not
necessarily translate into lower poverty
levels
3.0
60
2.5
50
2.0
40
1.5
30
1.0
20
0.5
10
0.0
0
Indonesia
Aceh
Tamiang
Aceh province Aceh Timur
Aceh Utara
Per capita GDP (times the national average)
Poverty headcount in %, 2004
Aceh will have the necessary
resources to combat poverty and
promote economic growth
18
16
Trillion rupiah (constant 2006 prices)
14
Gains from Law 11/2006
12
10
8
6
4
2
0
1999
2000
2001
2002
2003
2004
Total revenue with dana otsus ($60/brl)
2005
2006
2007
2008
2009
2010
2011
Total revenue without dana otsus ($60/brl)
bi
N
Su
at
io
m
na
at
ra
l
Se
la
ta
n
La
m
pu
ng
Ja
w
a
Ba
ra
t
Ba
nt
en
Ja
m
600
Su
R
ia
la
u
w
Ka
es
lim
iU
an
ta
ra
ta
n
Te
ng
ah
Yo
gy
Ka
ak
lim
ar
an
ta
ta
n
Ti
m
N
ur
us
Be
a
ng
Te
ku
ng
lu
N
g
us
ar
a
a
Te
Ti
m
ng
ur
ga
ra
Ba
Su
ra
m
t
at
ra
U
ta
ra
Pa
pu
a
Education per capita public expenditure is
the second highest in the country (2004)
Per Capita Education Expenditure 2004
Thousand Rupiah
800
700
Aceh
500
400
300
200
100
0
0
Banten
Jawa Barat
Lampung
Jawa Timur
Jawa Tengah
Sumatra Selatan
Maluku Utara
Sulawesi Utara
Sulawesi Tenggara
Nusa Tenggara Barat
National
Sumatra Utara
Sulawesi Selatan
Kalimantan Barat
Yogyakarta
Bangka Belitung
Sumatra Barat
Nusa Tenggara Timur
150
Jambi
Bengkulu
Bali
Kalimantan Selatan
Aceh
Sulawesi Tengah
Maluku
D K I Jakarta
Kalimantan Tengah
Riau
Gorontalo
Kalimantan Timur
Papua
Health per capita public expenditure is
well above the national level (2004)
Thousand Rupiah
Per Capita Health Expenditure 2004
350
300
250
200
Aceh
100
50
But both education and health
outcomes are not significantly better
than in the rest of the country…
…signaling the need to improve the efficiency of spending
Graduation rates 2004/05
Primary school (SD)
Junior high school (SMP)
Senior high school (SMA)
Aceh
96.6
89.5
91.5
North Sumatra
97.6
93.4
87.7
Indonesia
96.8
98.0
92.1
Immunization Coverage in
Aceh vs. Indonesia
BCG immunization coverage
100
82
85
89
92
94
100
90
80
80
60
%
70
56
68
63
70
73
20
%
60
40
50
40
30
0
1
2
3
4
Income quintile
Aceh province
Indonesia
5
20
10
0
BCG
DPT1
2004
DPT3
2005
Polio 1
2006
Polio 4
2006 Indonesia
Measles
Priorities for Poverty Alleviation (i)

Longer-term development efforts should focus on the
poorest areas of Aceh, in particular those in the rural
interior and more remote areas. Current focus on
tsunami affected areas might have to be revised;

Any poverty alleviation strategy should focus on
increasing the productivity of the agricultural and
fisheries sectors, as well as a strategy to improve the
capabilities of the poor and linking them to growth poles
in urban areas;

The Government of Aceh should diversify the economy
away from natural resources and increase transparency
of the distribution and use of revenues.
Priorities for Poverty Alleviation (ii)

The Government of Aceh should invest in a strong civil
service that ensures an efficient allocation of resources,
as well as the provision of quality public services;

Given Aceh’s large resources and opportunities,
spending patters should be improved. Scrutinize
increased spending on government administration and
the civil service wage bill;

Education and health spending is very high, but
efficiency of spending can be improved. In all sectors,
better planning and budgeting should align needs
identified with allocation of resources.