Aceh Province to Exploit Natural Resources: North Sumatra

Aceh is a province that is blessed by abundant natural resources and wealth that have long lain undeveloped due to a 32-year insurgency that only recently came to an end. Now, in a new era of peace and development after the long years of civil unrest and the 2004 tsunami disaster, the opportunities for business appear almost endless in the country’s westernmost province as Andi Haswidi reported in Business News.

The region is blessed with bountiful mineral, energy, marine, agricultural and plantation resources that are now open to new investment.

According to a recent report from the Energy and Mineral Resources Ministry, the province holds an estimated 20 million tons of gold, 600 million tons of copper, 32 million tons of platinum, 32 million tons of mercury, 53,000 tons of lead, 350,000 tons of iron ore, 6.4 million tons of iron sand and 600 million tons of molybdenum.

On top of all that, it also boasts some 114 billion tons of coal reserves.

“The mining and energy potentials described by the report illustrate just how big the opportunities are. And almost all of these resources have never been touched before due to the long years of conflict,” Aceh Investor Outreach Office director Syafruddin Chan said in Banda Aceh.

The mining and energy sectors should serve as the locomotive to get the province’s economic growth back on track. Things have already started to move thanks to the Rp 60 trillion (about US$6.6 billion) being invested in rehabilitation projects.

But there is a growing concern that the provincial economy could grind to a virtual halt again after the rehabilitation work by the Aceh and Nias Rehabilitation and Reconstruction Agency (BRR) is completed in 2009.

“We are currently focusing on agricultural and marine products as regards developing the province’s economy. However, in the future, the most promising sector will be energy and minerals, such as coal,” BRR economics and business deputy Said Faisal Baabud told the Post earlier this week.

Aceh Governor Irwandi Yusuf has acknowledged the importance of mineral resources in the provincial economic plan, despite their adverse consequences for the environment.

In order to minimize destructive environmental impacts, the provincial administration has introduced tight licensing procedures for mining operations.

“We have received a lot of mining exploration proposals, but so far have only licensed three companies,” he said as quoted by the local Serambi daily in its Wednesday edition.

In the agricultural sector, key commodities grown in the province include rice, corn, soybeans, nuts, sweet potatoes and other edible tubers.

In 2005 alone, only a year after the tsunami disaster, the rice fields of Aceh produced 1.4 million tons of the national staple. In the same year, Aceh also produced 59,370 tons of Arabica and Robusta coffee, 250,000 tons of crude palm oil (CPO) and 78,031 tons of rubber.

The potential of the marine and fisheries industry in Aceh has yet to be developed. The province has a coastline extending to 1,600 square kilometers, and an exclusive economic zone (ZEE) of 534,520 square kilometers. In all, the province has the potential to produce 173,045 tons of fisheries products per year, excluding the ZEE.

With the help of the World Bank’s private sector development firm, the International Finance Corporation (IFC), the province has begun to promote the farming of what are touted to be the world’s best black tiger shrimps. Production currently amounts to about 8,000 tons per year, and the industry has the potential to generate annual foreign exchange earnings of up to $50 million.

Investment procedures in Aceh have also been simplified through the establishment of the Aceh One-Stop Investment Service (KPTSP). Business permits can now be processed in 7 working days under normal circumstances, and in one or two days in special cases if all the requirements have been satisfied.

“Aceh is now in need of foreign investors to bring in the capital and the technological know-how to help increase the value of our products. For those who invest a minimum of Rp 5 billion, we are ready to exempt them from paying local taxes,” KPTSP director Said Yulizal promised.

For some early birds, the promise of more relaxed investment procedures has been too good to miss. Since it was set up two months ago, the KPTSP has issued more than 1,000 business permits to local and foreign investors.

Andi Haswidi