Diagnosis and Activities for the Local Economic Development of Aceh Besar

1. Diagnosis and Activities for the Local Economic Development of Aceh Besar

2. Identify, with a rapid appraisal, the main strengths and weaknesses of the local economy and its main sectors (duration: 1 - 2 weeks) Identify options for practical activities to strengthen the competitiveness of firms -- Criteria: feasible with local resources quickly implementable (starting next week) quick, visible results (with 3 months) What is the objective of PACA?

3. Preparation: *Organisation *Advance Info Interviews HypothesisWorkshop Kick-off Workshop Presentation Event Way-forward Workshop Imple- mentation Fieldwork (8-15/12) Mini-workshops PACA-Exercise (5-19/12) PACA-Project What is the sequence of activitiesin the PACA Exercise in Aceh Besar? Results- Workshop: Diagnosis + Proposals 8.12. 19.12.onwards 17./18.12. 19.12.

4. Kick-off workshop (8 December 2005) Interviews with businesspeople and stakeholdersin Aceh Besar (8 – 15 December) Mini-workshops (6) with Fish Processing (9 December) Construction Material (10 December) Agro-Processing (12 December) Fertilizer Production (13 December) SMEs in General (14 December) Supporting Institutions (15 December) Internal Results Workshop (16-17 December) Presentation Event (19 December) Way-forward workshops (from 19 December onwards) What have we been doing?

5. Kick-off Workshop

6. Interview

7. Interview

8. Mini-Workshop

9. Mini-Workshop

10. What are the sectors mainly considered? • Fish Processing • Construction Material • Agro-Processing • Fertilizer Production • SMEs in General • Supporting Institutions

11. Analysis of the Local Economy in Aceh Besar

12. Fish Processing

13. Fish Processing Strengths Large resources of a wide variety of fishes in the sea around Aceh Besar Products taste deliciously, do not use preservatives and have export-quality Tiny fishes (ikan teri) from Medan are actually produced in Aceh Strong market demand for processed fish Large availability of labour Low production cost Only a few competitors in the sector

14. Fish Processing Weaknesses • Use of simple technology and lack of equipment to process fish • Many boats (palung) were destroyed by the tsunami • Non-availability of cold storage • Poor quality of human resources and skills, particularly in business management • No packaging and labeling of products • Lack of promotion for wider marketing efforts

15. Construction Material

16. Construction Material Strengths Large area of forest and construction raw materials reosurces, e.g. mountain rocks, sand, pebbles, etc. Availability of a cement factory (reopening in 2006) High demand for construction material from NGOs and the government in Aceh Besar and Banda Aceh. Good and challenging prospect for investment in 2006 - 2007 Many post-tsunami construction projects in Aceh that are labour-intensive

17. Construction Material Weaknesses Lack of skills training Lack of investment capital The practice of KKN obstructs the development of the construction industry, thus creating a varying level of quality High competition in price and raw material with products from outside the area (Medan) results in unstable market access Lack of access to bidding procedures for post-tsunami reconstruction Lack of wood stock Limited transport Lack of heavy equipment to extract materials

18. Agro-processing

19. Agro-processing Strengths Employement opportunities for women Abundant availability of raw material Abundant availability of labour in the region High marketing potential for processed products The development of own credit groups Coffee produced in Aceh Besar is considered to be of high-quality

20. Agro-processing Weaknesses Lack of working capital Lack of promotion, thus products only reach local markets Packaging is not appealing Traditional processing methods Lack of facilities and infrastructure for production Lack of product variety Limited support from government to develop the sector Poor bargaining position to suppliers and trading agents Lack of cooperatives in the sector

21. Fertilizer Production

22. Fertilizer Production Strengths Price of organic fertilizer is cheap and reasonable Stable linkages to permanent customers The product (organic fertilizer) is well-known in Malaysia, opening opportunties for export Abundant availability of raw material in Aceh Besar Several fertilizer factories operating in Aceh Besar No need for advanced technology in producing organic fertilizers High demand for fertilizers

23. Fertilizer Production Weaknesses Lack of investment capital to develop the business Strong competition from other regions (domestic and international) Lack of business management training Lack of attention by the government for developing the sector Production capacities do not meet the demand Monopolized distribution structures Marketing is focused on the local area only Poor marketing activities Price of chemical fertilizers is considered expensive Farmers favor the use of chemical fertilizers over organic fertilizers Produksi Pupuk

24. SMEs in general

25. SMEs in general Strengths Abundant availability of raw material Adaptability to market changes Leading sector with high potential to reduce unemployment Originally processed material – without preservatives / chemical substances – helps to produce healthy and fresh food High demand after the tsunami, supported by a relatively safe post-conflict environment Availability of transport services to support the business

26. SMEs in general Weaknesses Lack of dissemination of SME-relevant information by the government and cooperatives Lack of working capital and supportive human resources Lack of management staff, particularly with skills in financial management and marketing Raw material is often supplied from outside the region (Medan) No high-quality meat processing industry for export

27. Supporting institutions

28. Supporting institutioins Strengths Universities provide experts able to conduct research and support the development of the local economy District government expresses intention to establish a one-stop service The government, universities and employers’ association are interested in cooperating in the fields of training and consultancy for the business sector KADIN opens opportunities for SMEs, through PINBIS (Business Information Centre).

29. Supporting institutioins Weaknesses Difficult access to credit Poor quality of human resources and skills in the government Trainings is hardly demand-oriented Lack of consistent interaction between the government, universities and employers’ associations Lack of supporting facilities and infrastructure Lengthy bureaucracy and lack of transparent regulatory framework Corruption, Collusion and Nepotism (KKN) Lack of business development services

30. LED Proposals to Strengthen the Local Economy of Aceh Besar

31. What to Do: Training of Trainers in relevant professions in the construction industry (e.g. carpentry, brick laying, electrical wiring etc) Introduce competency based vocational skills material / train entrepreneurs and small contractors in skills and entrepreneurship training Micro-leasing to make equipment available Potential Responsibilities:ILO, BLKs, local training providers Expected Results:Local organizations will be capacitated to provide skills training to women and men who work in the construction sector along with business management skills training. This will result in improved quality of housing reconstruction. Construction Material Proposal 1: Skills Improvement

32. What to Do: Make more transparent information available about material construction suppliers and contractors in the construction industry Could be business opportunity for a printing company/local consultancy company to print booklet or a directory of advice and assistance where suppliers and contractors can advertise Potential Responsibilities:ILO, BRR, Kadin, Apindo, Gapensi, ArCli Expected Results:This will result in a more transparent re-construction process where suppliers and contractors are available to access market information more easily and this will lead to a more efficient use of resources and quicker implementation. Construction Material Proposal 2: Information Access in Construction Sector

33. What to Do: Make available funds to a local bank / local banks provide funds (micro leasing) to fishermen to repair/build Palung boats Provide fish dry equipment (Micro Leasing) to groups of fishermen Potential Responsibilities:BRR,ILO/Mercy corps (capacitate local banks), FAO (supervise boats’ quality), International NGO (OXFAM, Cardi…) (provide micro leasing funds) Expected Results:Local group of fishermen can recover, upgrade the quality and boost their dry fish production. Fish Processing Proposal 3: Revolving funds for Palung boats

34. What to Do: Training of Trainers for upgraded fish processing techniques Train fish processing entrepreneurs in skills and entrepreneurship training Potential Responsibilities:FAO/Panglima Laot, Local NGO (PUGAR…) (technical training of trainers) / ILO (business management training) Expected Results:Local organizations/institutions will be capacitated to provide skills training to technical and managerial training to fish processing entrepreneurs Fish Processing Proposal 4: Training to Fish Processors

35. What to Do: Identify agricultural producers (farmers groups/cooperatives) having good market demand (value added) Assess capital needs for agricultural processing equipment and assist producers in writing business plans/credit proposals Work with financial institutions/BPRs to provide credit for equipment and working capital (possibly through ILO credit guarantee funds or through micro leasing) Potential Responsibilities:ILO with Partners in Microfinance, Mercy Corps, BRR Expected Results: Improved access to credit for agricultural producers allowing them to add higher value to their products resulting in higher market prices, increased business revenue, business expansion and job creation. Agro-processing Proposal 5: Improve Access to Credit

36. What to Do:Identification of opportunities to diversify and develop innovative products based on comparative research in countries/Indonesian provinces with similar agricultural conditions. Potential Responsibilities:BRR, Dekranas, FAO Expected Results: Innovative product diversification would help local producers to increase production, extend number and type of customers in the local market and expand to new non-local markets. Agro-processing Proposal 6: Development of Innovative Products

37. What to Do:Training of farmers on the right usage including promotion of organic fertilizers, blending of organic and chemical fertilizers, timing of fertilization and using the appropriate dosage. Potential Responsibilities:FAO, PT. Pertani, Dinas Pertanian, Universitas Syiah Kuala, HKTI Expected Results: The proper usage of fertilizers by farmers will make the demand for fertilizers more stable and predictable, conserve the soil and increase the yield. Fertilizer Production Proposal 7: Training on Fertilizer Usage

38. What to Do: Promoting and establishing a Local Economic Development Forum consisting of key economic stakeholders of Aceh Besar (Government, Private sector, University, Civil Society and relevant international economic actors) Coordinate the implementation of LED activities in the short- and medium term and design LED Strategy for Aceh Besar in the medium and long-term Potential Responsibilities:BRR, World Bank (SPADA, KDP), ILO, UNDP, other International donors (initiate LED Forum), key stakeholders from all sectors Expected Results:LED Forum coordinates LED activities and submits economic recovery and LED proposals to relevant national and international programs/ organisations SMEs in general Proposal 8: Initiate LED forum in Aceh Besar

39. What to Do: Introduce entrepreneurship education, business start-up and business improvement training materials / market business management training to local service and training provider organisations Capacitate local partner organisations to deliver business management training to MSME Potential Responsibilities:ILO (initially), Local training organisations (continue to deliver training after ILO withdrew) Expected Results: Potential business owners will be able to start their own business and create employment opportunities. Existing business owners will have improved their business management skills leading to higher productivity, more sales, increased revenue and the creation of jobs SMEs in general Proposal 9: Business Management Training

40. What to Do:Support the district government in starting the publication and regular update of information on market prices on various key products in Aceh Besar. Media could be boards, print media and electronic media. Potential Responsibilities:District Bappeda Aceh Besar, ILO, Kadin Expected Results: Producers in local key sectors are better informed about market prices, less depending on information received by middle traders and thus able to yield higher profit. Moreover, their capability is enhanced to plan production properly depending on the market signals. SMEs in general Proposal 10: Market Price Information

41. What to Do: Strengthen the capacity of microfinance institutions in Aceh Besar to provide microfinance and small loans to businesses in Aceh Besar Identify areas for interventions, such as credit analysis, credit guarantee funds, micro leasing etc and subsequently introduce materials and new financial products in selected BPRs Potential Responsibilities:ILO and partner organisations, Mercy Corps, BRR Expected Results: This will result in improved and increased lending by the MF/BPRs to small enterprises which will give these much needed investment and working capital to start, improve and expand their businesses. Supporting institutioins Proposal 11: Capacity Building in Microfinance Institutions /BPRs

42. What to Do:Provide expert advice to the district government during the process of setting up a One-Stop-Service (OSS) system, including the visit to other districts with successfully implemented OSS. Potential Responsibilities:District Bappeda, various donor organisations, DPRD Expected Results: Professional advice will ensure that the OSS is set up properly. Accordingly, the interaction between enterprises and government is expected to become faster, less bureaucratic and cheaper for enterprises. Supporting institutioins Proposal 12: Advice for One-Stop-Service System

43. What to Do:Provide short training courses (up to 3-days) to local government institutions on LED and enabling environment. Testing a training format in Aceh Besar and possible later extension to other districts in Aceh. Potential Responsibilities:ILO, KDP, SPADA, District Government Aceh Besar Expected Results:Creation of awareness and comprehensive understanding among district authorities on LED and on ways to improve the business environment. Supporting institutioins Proposal 13: LED Training to District Government

44. What to Do:Organize a workshop on training needs assessment for Vocational Training Providers (Government, Private, International Organizations) Potential Responsibilities:ILO to introduce training needs assessment skills materials with BLKs, local and International training providers Expected Results:Local and International organizations will be capacitated to provide and conduct training needs assessment techniques will better match the needs of the market Supporting institutioins Proposal 14: Advice on Training Needs Assessment

45. Construction Material: Identify and train local small constructors in Aceh Besar to contribute to the reconstruction process / Provide grants/equipment, microfinance or micro leasing to the small contractors Quality control and certification standards for construction material Setting up a mechanism to inform construction materials suppliers about projects in Aceh Besar Fishery/Fish Processing: Reactivation/reconstruction of sweet water fish ponds in Aceh Besar Establishing a cooperative of fish-processors Further Medium- and Long Term Proposals

46. Agro-Processing: Equipping small local food-processors with simple machineryto cut e.g. cassava. Fertilizer Production: Initiate University research to improve the quality of fertilizers. SMEs in general: Conduct a study on the economic potential of livestock and dairy products in Aceh Besar Promotion of products from Aceh Besar outside the district and province enter new markets. Further Medium- and Long Term Proposals

47. Christian Schoen (mesopartner) Julien Magnat (ILO) Muh. Rizal (ILO) Evy Iskandar (Program Pengembangan Kecamatan) Razali (BAPPEDA Aceh Besar) Wahyu Saputra (HMI) Rosi Malia (APINDO) Kasmanuddin (KADIN) Saifullah (BAPPEDA Sabang) Zulkifli (FE Unsyiah) Ida Tresnasari (ILO) Who is the PACA Team?

48. Terimah Kasih