1.The APED Project
Both the Master Plan for the Rehabilitation and Reconstruction of Aceh / Nias prepared by Bappenas after the tsunami of December 2004, and later plans that support the Helsinki peace accords, are mainly concerned with immediate actions and programmes of limited duration that aim to speed recovery and enable survivors to resume a normal life.  Massive support following the tsunami has helped survivors get back on their feet.  With the peace accords, families are now attempting to revive their farms and businesses, while former combatants seek a fresh start and rewarding employment.  However, at the end of 2009, the huge programme for post tsunami rehabilitation and reconstruction will terminate, and the short term boost to employ¬ment and economic activity will rapidly wane.  Major efforts are now needed to maximize the benefits from invest¬ment in these recovery programmes and to build a strong economic base for longer term prosperity.  Meanwhile, the tasks of building a sustainable peace and reducing poverty remain.  
While each is important in its own way, most of these efforts focus on specific elements of economic activity rather than the actors involved.
Even today, the perception of investors are atill wary of
This is an important lesson and one that is reflected in the objectives and design of the APED project.       (This implies the need for greater emphasis on demand analysis, marketing, and linking producers to larger firms that use their inputs or export their products to other parts of Indonesia or elsewhere.) 
In contrast, UNDP’s APED project adopts a different approach.  It seeks to build and empower local partnerships between government, the business community and other stakeholders involved in clusters of economic activities associated with export commodities.  The project aims to empower these partner¬ships to generate their own initiatives for promoting the cluster, mobilise resources from partner agencies, and collaborate with these organisations in implementing initiatives.  The presence of many donor programs and the reviving interest of national enterprises following the peace accords creates an unusually promising opportunity to lay the foundations for a new alliance between government and the private sector in spurring production and trade, creating employment and raising incomes in the region. 
The APED project builds on an earlier initiative in support of the coffee industry.  This was launched in September 2005 by UNDP in collaboration with Bappeda NAD (Provincial Agency for Planning and Development) with the formation of a Coffee Forum.   The Forum has met regularly since then and members have generated several pro¬posals for revitalising the coffee industry, which partners are now implementing.    Coffee was chosen as the initial industry to support due to strong worldwide demand for Aceh Arabica coffee and the substantial potential to raise farmer productivity and incomes. 
In February 2006, UNDP obtained funds from DFID through the Decentralization Support Facility (DSF) to support APED for an initial period ending December 2007.  Supplementary funding, which terminates in March 2008, has been provided by DFID through UNDP’s umbrella programme for Aceh and Nias, the Emergency Response and Transitional Recovery (ERTR).  Under APED, UNDP, Bappenas (the National Board from Development Planning) and Bappeda NAD are working together to consolidate and expand progress achieved in the coffee sector, and to expand support to similar public-private partnerships for other sectors.  UNDP is now looking for additional funding to continue APED beyond March 2008 and to expand the project to other sectors.  (See section 11 below.) 

2.The APED approach
APED builds on experience gained from other recent prog¬rammes for local economic development, and is based on an approach that has already been developed and tested by UNDP and USAID in other parts of Indonesia.  This is based on two underlying principles:  stakeholder empower¬ment and market demand. 
i. Stakeholder empowerment
A key element of the APED approach is the empowerment of public-private partner¬ships associated with export clusters that enable government, the private sector and other stake¬holders to collaborate in promoting economic develop¬ment in Aceh.  Partnerships inc¬lude represent¬atives of government, the business community, producer associations and other organisations that are closely involved in the cluster and best understand the problems and oppor¬tunities facing it. 
The partnership’s role is to generate ideas for spurring production, trade and marketing of cluster commodities; to mobilise necessary material, financial and institutional resources; and to collaborate with other organ¬isations in implementing plans and initiatives.  APED’s role is to build the capacity of these partnerships to become self-supporting bodies capable of providing leadership in promoting their industries.  

ii. Market demand
Most government efforts to promote economic development in Indonesia (and other similar countries) focus on production and the supply side.  APED emphasises instead an approach which aims to: 
•Apply a “market driven” approach to local economic planning and development.
•Promote local economic development based on exports out of the region.
•Focus on clusters of economic activities associated with key export commodities.
•Link small-scale producers to broader markets through collaboration with larger scale enterprises.

iii.Clusters
A cluster typically includes large firms, small busi¬nesses, households and support¬ing insti¬tutions engaged in production, processing and trade associated with an export commod¬ity.  “Exports” are taken to mean sales to non-local markets outside the province of Aceh.  This includes both other provinces in Indonesia as well as other countries. 
The selection of clusters is based on criteria that reflect:
•Potential demand for cluster products in non-local markets, and potential for adding value to local produce
•Potential for involving farmers, fishermen and other small scale enterprises, raising household incomes and creating productive employment opportunities
•Potential benefits for poorer households and women through employment, skill training, small enterprises or trade and production activities 
•Potential local interest and support as a focal point for economic development.

To take into account the special circumstances in Aceh, criteria also include:
•Potential benefits for those affected by recent natural disasters and ex-combatants seeking reintegration following the peace accords 
•Potential to resuscitate production and business activity in areas affected by the tsunami and years of civil strife
•The equitable geographic distribution of other projects for economic develop¬ment in Aceh, either ongoing or planned.
The choice of appropriate clusters in Aceh is determined through public consul¬tation and further assessment of proposals already developed by others.  While oil and gas account for a major part of regional output, broad based economic growth is more likely to be achieved by promoting clusters associated with activities from which most people earn a living.  This suggests forestry, petty manu¬facturing, the service sector and particularly agriculture and fishing. 

3.Progress achieved to date

i. Clusters
APED continues to support the Coffee Forum and has recently started to support a second cluster based on cocoa.  Consultants have also been recruited to evaluate market potential for the livestock, aquaculture and rubber industries in Aceh, and other clusters that have been suggested inc¬lude nutmeg and cloves. 

ii. Stakeholders Forums
As mentioned earlier, the Coffee Forum was launched in September 2005.  The Governor of Aceh is expected shortly to announce the formal establishment of a similar Forum for cocoa, although stake¬holders have already been meeting to discuss plans.  Participants at forum meetings have included represent¬atives from provincial and district government, farmers associa¬tions, the business community, donors and other institutions related to the coffee and cocoa industries.  Average attendance at meetings has been sur¬prisingly high, in the order of 50 to 60 people each time, one indication of the high and sustained level of interest among stakeholders.  The balance attained between men and women will be maintained in order to ensure women needs and aspirations are accommodated in the forum. To ensure openness and account¬ability, agendas of these meet¬ings are circulated beforehand, and minutes are distributed to participants afterwards.  It is also proposed that the forum will include in its internal regulations measures to ensure ensure gender equality perspectives are in place.

iii. Stakeholder Empowerment
An important further step towards empowering stake¬holders was completed at the October 2006 meeting of the Coffee Forum with the election of a Co-chair representing non-government stakeholders and a 12 person Executive Commit¬tee to facilitate planning and decision making.  Members of this committee include representatives from government, the business community, far¬mers and other organisations from the province and the two main coffee producing districts of Aceh Tengah and Bener Meriah.  APED II will promote gender awareness through socialization exercises, campaigns, publications and other relevant media.

iv. Mobilising Resources
The Coffee Forum is proving effective as a platform to mobilise resources for the industry.  Total budget allocations from central, provincial and district govern¬ments in 2006 for the coffee sector amounted to Rp 10.8 billion ($1.17 million) and a similar amount in 2007.  Funds were used for farm rehabilitation, provision of seedlings for farmers, disease control, infrastructure, and support for a government corporation, PD Genap Mufakat.  Meanwhile, the BRR (Board for Reconstruction and Rehabili¬tation) has been providing substantial funds for the rehabilitation of coffee and cocoa farms.  Independently, other organisations participating in the Coffee Forum have been investing their own resources in initiatives to support farmers, raise productivity and improve the quality of Aceh Arabica coffee.  Recently, APED collaborated with another UNDP project, SSPDA (Strengthening Sustainable Peace and Development in Aceh) to distribute production tools and equipment to IDPs most of whom are coffee farmers. 

v.  APED Funded Projects
The Coffee Forum has also approved the use of APED’s own funds for several other projects.  These include: 
• A coffee manual and DVD which are being prepared for the use of extension workers. 
• An assessment of coffee seedlings is being undertaken in collabor¬ation with ICCRI (the Indonesian Coffee and Cocoa Research Institute in Jember, Central Java) with the aim of providing guidance to the many farmers who are now rehabilitating their coffee plantations after years of neglect. 
• A bimonthly newsletter is being published with news on the coffee and cocoa industries. 
• A website has been designed and will shortly be launched with similar information. 
• An SMS based price information system was launched in September 2007 providing information twice a week on coffee prices in local markets. 
• Through an RFP (request for proposals), APED has recently contracted two inter¬national organisations to strengthen coffee supply chains through the use of grants worth $100,000 each. 
• As mentioned above, tools and equipment are being distributed to coffee cooperatives and some 600 farmers. 

vi. Stakeholder Participation
Active participation in Forum meetings from all segments of the business community is an essential precondition for empowering stakeholders to play an effective role in strengthening the coffee industry in Aceh.  To achieve sustain¬ability, the longer term goal is to build the Coffee Forum into a permanent body of some sort, capable of mobilising resources, raising standards, and promoting Aceh coffee in world markets.  Government and other stakeholders support this goal, and steps are under way to prepare the ground for such an organisation, with the aim of launching it in 2008. 

4.Lessons Learned
Quarterly reports prepared by the APED team include a section on lessons learned.  These have discussed such topics as:
• The role of non-government stakeholders in the Coffee Forum
• The use of public funds in support of the coffee industry
• Supply chains and linking farmers to markets
• Coordination with other organisations involved in the coffee industry
• Delays in implementation, and
• Attracting the participation of private enterprise in Forum activities
• The need for training agricultural extension workers (TOT).
These lessons have prompted ideas for addressing problems, some of which have been implemented with good effect.  Other issues have proven harder to solve and require a longer term effort which is difficult to sustain. 
This suggests that APED should adopt a more structured approach to learning lessons and applying them.  For this purpose, during the next phase of the project, APED will organise seminars twice a year for stakeholders and staff to evaluate progress, identify short¬comings, generate lessons for future application and monitor implementation of previous lessons learned. 
One of the key longer term issues that needs to be addressed is reorienting govern¬ment’s approach to supporting local economic development.   The standard app¬roach in Indonesia, inherited from years of practice under the Soeharto regime, assumes that government should take the lead, treating the business community largely as passive spectators.  As a result, govern¬ment funded activities may not address the real issues as perceived by those in the business.  Some leaders are aware of the need for change, but may not know how to go about it.  APED aims to help them make necessary adjustments, but this involves changing entrenched mindsets and operational procedures.  This is something that APED needs to address more directly in the future.

5.APED Phase II
APED activities to date may be considered as Phase I of the project, implemented with funding that has been provided so far.   UNDP is now mobilising funds to for Phase II covering the period 2008 through 2010, which aims to build on experience gained and progress achieved in Phase I.  A three year period is needed to realise the larger goals envisaged for stakeholder empowerment and economic impact. 
Goal and objective.  The underlying goal and objective of APED Phase II remain the same as for Phase I.  The overall goal is to create productive jobs and raise house¬hold incomes for the people of Aceh, particularly among the poor, including women, and in areas affected by conflict and natural disasters.  The objective is to strengthen the capacity of local government, the business community and other stakeholders to collaborate in promoting economic development in the region. 
APED Phase II will essentially build on the foundations laid by Phase I, expand support to two or three more clusters, and extend support for a period long enough to achieve a tangible impact on farmer productivity and incomes, value added to agricultural commodities through local processing, and earnings from exports. 

6.Expected Results

i.Outputs and Activities

The principle outputs and activities to be achieved during APED Phase II include:
• Formation and empowerment of public-private partnerships at the provin¬cial and district levels to promote additional clusters of economic activities
• Implementation of initiatives and projects developed by these partnerships for develop¬ment of the clusters
• The adoption by provincial and district governments of new models and procedures for supporting local economic development in the region

Output 1:  Formation and empowerment of public-private partnerships at the provincial and district levels to promote additional clusters of economic activities
Activities 
• Recruit and train facilitators on the APED approach and produce training materials for use of facilitators and partnerships.
• Meet with representatives from province and district governments (Bappedas et al), the private sector, producer groups and others to explore interest and ideas.
• Hold workshops at the provincial level and in selected districts to explain the project, present proposals and encourage the participation of the private sector and particularly women, taking into account timing and other factors to ensure women’s participation. 
• Establish public-private partnerships for selected clusters at the provincial level and in participating districts, linked to relevant groups of producers and small scale entrepreneurs.
• Arrange for the election of Co-chairs and members of an Executive Committee for each partnership, with the goal of including at least two or three women on each committee.
• Hold partnership meetings at the provincial and district levels at regular intervals, and provide intensive technical support to them.
• Assist partnerships in formulating viable initiatives for spurring production and trade, mobilising resources (from govern¬ment, the private sector, donors and NGOs), and implementing actions. 
• Monitor progress, and hold seminars twice a year for stakeholders and staff to evaluate progress, identify shortcomings, generate lessons for future application and monitor implementation of previous lessons learned.
• Arrange exchange visits for groups from CPRU projects in other parts of Indonesia to learn from APED about promoting economic development as a means to consolidate peace.

Output 2: Implementation of initiatives and projects developed by these partnerships for development of the clusters
Activities
• Identify government agencies, donors, NGOs and businesses interested in supporting initiatives proposed by the APED partnerships.
• Collaborate with these organisations in developing mutually agreed action plans and viable project proposals.
• Conduct a technical study of the supply chain associated with each cluster to assess market demand and the ability of local producers to compete in markets, and to outline an agenda for action to strengthen the local industry.
• Implement projects and actions to include for example:
- Collaborating with local government and donor programmes in restoring production facilities destroyed by the tsunami and / or rehabilitating farms neglected during civil strife
oWorking with the business community to strengthen supply chains linking farmer groups to larger enterprises for production, processing and export
- Engaging contractors to resuscitate agricultural research units and rebuild extension services oriented to market demand
- Collaborating with financial institutions to provide loans to agri-business enterprises and with NGOs to provide micro-credit to small scale farmers
- Engaging business enterprises in building and strengthening the capacity of farmer cooperatives to ensure quality standards in cultivation and post-harvest processing
- Undertaking a comprehensive training program starting with TOT for agricultural extension workers on methods of production, demand assessment, marketing, pest control, disease protection, soil conservation and other topics to reduce farmers’ vulnerability to natural disasters 
- Providing technical assistance to the provincial government to assess the feasibility of introducing a scheme to guarantee prices for selected agricultural commodities that are prone to wide fluctuations in world markets*
- Continuing collaboration with UNDP’s SSPDA project to ensure APED activities accurately target and encompass communities that suffered from recent conflict
- Collaborating with UNDP’s Disaster Risk Reduction project due to be launched later in 2008 to tap into their expertise on such matters as promoting awareness, preventive measures and construction standards.
•  Conduct gender analysis to ensure the information regarding gender issues is collected and forms the basis for response
• Encourage the active participation of women in all activities organised by the project, particularly in training sessions and partnership meetings.. 

Output 3:  The adoption by provincial and district governments of new models and procedures for supporting local economic development in the region
Activities 
• Disseminate new approaches to local economic development among local government leaders and mobilise their support for reforms
• Organise workshops and seminars for heads and staff of local government depart¬ments con¬cerned with economic development to foster new ways of thinking about potential collaboration between government and the business community
• Promote the APED approach to local economic development among government staff and assist them in setting up and empowering partner¬ships to promote clusters of economic activities
• Engage local government staff in discussions with representatives from farmer groups and business enterprises in developing new initiatives respon¬sive to market demand
• Assist local government to devise new modalities for hiring contractors to provide services in support of production and marketing that are results oriented and accountable to bodies representing farmers and the business community
• Provide on-site technical support to local government to assist them in designing, adopting and managing new methods of contracting services for economic development

ii. Gender considerations

Due to years of conflict in Aceh and its relative social and economic isolation from more developed regions of Indonesia, gender considerations have not been given the same emphasis in the province.  Most government agencies and public initiatives are still dominated by men, although women play an important role in household economic activities, not least in agricultural production. 
APED has not so far made much headway in promoting the role of women in the project, despite efforts to recruit female staff in the Technical Support Unit (TSU) and include women in the Executive Committee of the Coffee Forum.  This is partly because members of the Executive Committee are elected by those present at meetings when elections take place.  Nevertheless, APED has had more success at the community level, through the participation of women in activities for farm households,. 
During APED Phase II, more concerted efforts will be made to enhance the role of women in the project.  A gender analysis exercise will be carried out to determine effective methods to do this. Special attention will be given to recruiting competent women for the TSU and for consulting assignments by advertising openings more widely in national media.  Staff will be tasked with identifying female leaders and encouraging them to take leadership roles in the industries supported by the project, to participate more actively in Forum meetings, and to stand for election as members of Executive Committees.  The goal is to have at least two or three women on the Executive Committees of the partnerships for each cluster.   In addition, APED district coordinators will be asked to strengthen efforts to include more women farmers in field activities, and to maintain better records on those attending these activities and benefitting from them.  Sex disaggregated data and related information will be improved to ensure promotion of gender equality efforts.  The goal under APED Phase II is to ensure that at least 25% of participants and beneficiaries are women.  Those responsible for producing the Newsletter and website content will also be asked to give greater prominence to women and the roles they play in production, trading, processing and export sectors. 

iii. Disaster Mitigation

Steps to address earlier disasters. While the APED approach primarily aims to promote local economic development, its application in Aceh has been modified to respond to the special circumstances in the region, particularly with regard to mitigating the consequences of conflict and natural disasters.  As explained elsewhere in this document, this is being addressed in several ways. 
The selection of clusters includes two additional criteria.  One concerns the potential benefits for those affected by recent natural disasters and ex-combatants seeking reintegration following the peace accords.  Another is the potential to resuscitate production and business activity in areas affected by the tsunami and years of civil strife.  APED also emphasises broad participation of all stakeholders in the cluster Forums without regard to their previous affiliation.  The twelve person Executive Committee of the APED Coffee Forum includes nominees from organisations representing both sides in the conflict.  More significantly, APED’s efforts to empower members of the Forums to take the lead in promoting economic development is proving an effective means of dissolving former differences and re-uniting the community around the common goal of creating productive jobs and raising incomes from agricultural production.   
Steps to address future risks.  Potential future risks may be discussed in terms of political, economic and physical threats.  Economic threats are always present mainly as a result of fluctutations in world market prices.  But the APED approach is specifically designed to focus on sectors with strong potential for growth.  Prior to the selection of clusters, technical studies are undertaken placing particular emphasis on market demand and local capacity to compete in non-local markets.  After years of stifled production, demand for Aceh specialty arabica coffee is now high as reflected in market prices some 30% above the norm, and is expected to maintain a premium price for years to come.  Likewise, world prices for cocoa are higher than they have been for many years, and prospects for increased exports from Aceh are considered promising.  
Physical threats to the success of the APED project are not seen to be great.  While the region is prone to earthquakes, most of the damage has been to poorly constructed buildings in urban areas.  Only minor damage has been reported for plants processing agricultural commodities and irrigation networks in some areas in the plains.  But since coffee and cocoa are cultivated mainly on smaller plots in hilly areas, there has been virtually no damage to agricultural land or production facilities.   While the Indonesian archipelago is an area of unusually frequent volcanic action, the province of Aceh has seen little such activity for many years.  The tsunami of December 2004 of course is fresh in everybody’s mind, and several minor recurrences have since occurred in other parts of Indonesia.  But such events are not seen as a major threat to the APED project, partly because they occur rarely and more to the point because the production of coffee and cacao is almost entirely located far from the coast at higher altitudes.  Flooding and landslides are much more common, but again these rarely impact the clusters supported by  the project, not least because coffee and cacao plants themselves help to stabilise land on steeper slopes and prevent landslides. 
Nevertheless, despite the low risk of physical threats to the APED project, staff will collaborate with their counterparts in two other UNDP projects concerned with reducing the risk of disasters.  These are the ongoing Community Based Disaster Risk Reduction activites supported by UNDP’s ERTR program and a new initiative, Disaster Risk Reduction in Aceh and Nias (DRR-AN), which awaits confirmation for funding.  Collaboration will entail identifying APED areas with a higher risk of physical threats, coordinating activities and where appropriate incorporating disaster risk reduc¬tion measures in the design of APED sub-projects. 

iv. Impact

Through these outputs, APED Phase II will:
• Contribute to the recovery and growth of key sectors in the Aceh economy
• Create substantial opportunities for productive employment, small scale enterprises and household income generation, particularly for women and in areas affected by civil conflict and the earthquake and tsunami of December 2004.
• Provide new precedents and practices for local government collaboration with the business community in local economic development

Indirectly, APED Phase II will also:
• Alleviate poverty in the region among households, particularly women-headed households, engaged in economic activities related to the clusters promoted by the partnerships.