Aceh Poverty Assessment The impact of the Conflict, the Tsunami and Reconstruction on Poverty in Aceh

1
Aceh Poverty AssessmentThe impact of the
Conflict, the Tsunami and Reconstruction on
Poverty in Aceh
2
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.

3
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

4
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

5
Poverty increased in 2005, but by 2006 had
declined below pre-tsunami levels
2004 2005 2006
Aceh 28.4 32.6 26.5
Aceh Urban 17.6 20.4 14.7
Aceh Rural 32.6 36.2 30.1
Indonesia 16.7 16.0 17.8
6
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.
7
A large share of the population lives just above
the poverty line a small shock can send them
below the poverty line
Cumulative Distribution Function for rural Aceh,
2004-06
8
Pre-tsunami, poverty in Banda Aceh and
surrounding districts was significantly lower
9
Poverty increased in many districts in 2005, but
decreased in most in 2006
2005
2006
10
Characteristics of the poor in Aceh are similar
to the poor in other parts in Indonesia
Source BPS data and World Bank staff
calculations. Note /-- indicates statistical
significance at the 1 or 5 level, /-
significance at the 10 level.
11
Aceh has had slow growth rates for most of the
decade, mostly due to conflict and declining gas
extraction
12
Acehs economy continued to decline from 2001-05,
as the rest of Indonesia recovered from the
financial crisis
13
As a result, poverty continued to increase in
Aceh while it declined in most of Indonesia
14
Poverty growth elasticity in Aceh is one third of
the rest of Indonesia normal for economies
reliant on natural resources
15
availability of oil and gas does not
necessarily translate into lower poverty levels
16
Aceh will have the necessary resources to combat
poverty and promote economic growth
17
Education per capita public expenditure is the
second highest in the country (2004)
18
Health per capita public expenditure is well
above the national level (2004)
19
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
20
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.

21
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 Acehs 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.