Why Aceh Is Not Open for Business
(JG Graphics/Modina Rimolfa)
The provincial government of Aceh has sought to attract investors in earnest since the end of the conflict between the central government and the Free Aceh Movement (GAM) in 2005. It has had to contend with two fundamental concerns that potential investors have, of which the most important is insecurity. Of lesser concern, to me at least, is alleged Islamic "fundamentalism" there.
Aceh governor and former separatist Zaini Abdullah sought to reassure potential investors at last month's Go West! conference in Jakarta. Concerns about insecurity were said to be "baseless." And referring to Aceh's codification of Shariah law for Muslims and non-Muslims alike, Abdullah said Shariah "applies only to Muslims. For non-Muslims, there is no obligation at all to comply."
Both statements are disingenuous. Let's begin with the latter. In December Governor Abdullah signed into law a Qanun Jinayat or behavioral bylaw that requires non-Muslims to follow Shariah. This means, for example, that non-Muslim women must wear headscarves; three warnings and then they'll be caned.
Regarding "baseless" security concerns; ahead of the April 9 legislative elections, the Commission for Missing Persons and Victims of Violence (Kontras) counted 48 cases of election-related violence from January to March, including murder. Much of the violence occurred between two local parties: the Aceh Party (PA, Abdullah's party) and the Aceh National Party (PNA). PA deems itself GAM's only legitimate political successor. PNA contests this claim: it was founded by GAM veteran and ex-Governor Irwandi Yusuf.
Despite this violence, the 2014 election was an improvement on Aceh's 2012 gubernatorial election, which pitted the incumbent Irwandi against Abdullah. The 2012 election also illustrates PA's way of "doing business." Irwandi was elected as an independent in 2006; he was immensely popular due to his universal health care provision and his perceived incorruptibility. PA didn't wish to compete against him and sought to disallow his candidacy, and when that failed, it boycotted the election registration. The deadline passed: it demanded to be allowed to register again, and PA insinuated that it would "return to the past" if not allowed to re-register — i.e., that war would resume. It was allowed to register.
The number of killings, grenade attacks, and other violent incidents carried out by PA supporters in the months preceding the election correlated with the shift in public support from Irwandi to PA. In conversations with dozens of friends I once worked with in Aceh, nearly all voted for PA, not out of a legitimate desire to do so, but out of fear. Abdullah unseated Irwandi, who was actually assaulted at Abdullah's inauguration. To label an election result based on such pervasive intimidation "free and fair," as many observers did, is a farce. As was much of the 2014 election in rural eastern Aceh, where friends of mine described PA standing in the voting booths, to ensure people voted correctly.
In fairness to Governor Abdullah, election violence is targeted. But let's consider the macro aspects of Aceh's post-conflict security environment and its impact on the investment climate.
The end of the conflict did not mean the end of insurgent funding streams: GAM was rebranded as the Aceh Transition Committee (KPA), and KPA's local manifestations generally continued to do what they'd always done: levy parallel taxes. This is often referred to in non-conflict contexts as organized crime.
GAM's successor bodies could not provide for their grassroots in the way that their grassroots could provide for themselves during the war, when extortion and other crimes were "justifiable." This isn't to say that all GAM member were criminals; many fought for legitimate reasons. But insurgents need funds, and they are generally excluded from licit opportunities.
KPA channeled cash payments to combatants and communities. But it wasn't enough. The rural Aceh economy couldn't absorb this excess labor; many veterans simply couldn't find decent work. And for ex-combatants, the jobs had to be better than what existed before. People weren't going to return to working on land they don't even own. And so crime remained a livelihood.
Meanwhile, GAM "taxed" everything it could — post-tsunami construction and other projects, small businesses, even ordinary households. I witnessed all this, in Aceh Utara, Pidie, Bireuen, and other parts of the GAM heartland where I worked. My teams were carjacked; we had to shut projects to dig wells, build markets and repair irrigation because of the constant threats and demands. Extortion occurred from the largest construction projects in the province all the way down to my mechanic neighbor in Lhokseumawe who was still paying illegal levies to the same people he was paying before the conflict ended. These are only a few aspects of a climate of insecurity that continues to the present day.
Some projects were meant to provide opportunities for ex-combatants: through jobs, grants, training opportunities. I managed a few of them as well. The trainings to individuals tended to work. Some of the secondments to existing small businesses led to jobs. But these only worked in the towns. Many businesses failed. So did the cooperatives in the hinterlands. The rural economy couldn't absorb these entities either. And for a hard core of these veterans — the 10 percent or so who threatened, assaulted, even 'taxed' other participants — nine years after the peace, if you ask them what their job is, they say "GAM."
Reintegration worked for GAM elites; the province is theirs. Corruption is pervasive, and contracts are a currency in themselves. Reintegration has not worked at the grassroots; many ex-GAM members are still committing crimes for lack of other opportunities. Every potential investment is viewed as extortable by select veterans and provincial officials, from the governor's office to the smallest hamlet. This underscores why Aceh often only manages to attract "enclave investments" involving natural resource extraction: metals, timber, palm oil, with profits leaving the province rather than being reinvested. These opportunities provide next-to-nothing for local people, and this was one of the core grievances articulated by GAM to justify its rebellion.
For those who are content to extort, there's no law to stop them. This is the key paradox: reintegration only works with the simultaneous re-establishment of law enforcement. But GAM's successors couldn't allow for adequate policing of their rank-and-file because it interferes with the income streams of the people they need support from, and they can't provide alternatives.
Governor Abdullah and the Aceh Regional Investment Coordinating Board's solution to the lack of rule of law and contract enforceability that inhibits investment in Aceh is to re-brand the province as a tourist destination, and through this, they hope to attract Rp 5 trillion ($435 million) in investment in financial year 2014. At the same time, tourists choosing to wear beach attire could theoretically be caned.
The provincial government needs investment to provide opportunity as well as alternatives to crime. But it can't attract investment without establishing the rule of law. Aceh's current rulers want the former and need the latter. But they can't have both, so instead of making hard policy decisions to attract and protect the investments that Aceh needs, they simply pretend. The due diligence performed by any potential investor would quickly uncover these false claims. And so trust — the key ingredient in any investment — is violated, before it even begins.
Bobby Anderson works on health, education and governance projects in Eastern Indonesia. Contact him at rubashov@yahoo.com.
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