Aceh tsunami: Long-term economic recovery after the disaster

Abstract

This study looks at the dynamics of the Aceh economy before and after the 2004 Indian Ocean tsunami that devastated Aceh, resulting in over 150,000 people killed and causing major disruption to the infrastructure, community and economy. On the other hand, the disaster served as a stepping stone to ending three decades of secessionist conflict in the province. The study analyses at the district level how different sectors of the economy have grown after the disaster in regions that were significantly affected, partly affected or not affected by the tsunami. It also looks at other macroeconomic measures such as inflation and unemployment. Analysis of time series data indicates that Aceh has managed to return to its pre-tsunami growth path, albeit at a rate slower than its closest neighbour. The poverty rate has declined and is now closer to the rest of Indonesia. The formal sector has developed and the economy has industrialised, especially in the districts worst hit by the tsunami. One concern revealed by the data, however, is that unemployment rates remain high in the worst hit districts. The study looks at the cause of this phenomenon, and what this means for Aceh's long-term recovery.