Involuntary Resettlement and Economic Development: A Study of Koto Panjang Dam Project. S.Karimi 1 1 Andalas University, Indonesia

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1 Involuntary Resettlement and Economic Development: A Study of Koto Panjang Dam Project S.Karimi 1 1 Andalas University, Indonesia syafruddin_karimi@yahoo.com 1. Introduction After sixty years of independence, Indonesia is still having a hard time to supply its citizen needs for electricity. Until today, the State Electric Company (PLN) still practices a regular sudden disconnection of electricity current, especially in Outer Java provinces. Consumers have to accept the reality, since they have also to realize the monopoly power of PLN and the increasing demand of electricity. The Koto Panjang dam construction was in response to the rapidly increasing demand for electricity in the central region of Sumatra, particularly the provinces of Riau and West Sumatra (JBIC 2002). By utilizing water resources from Muara Mahat river, the Government of Indonesia has constructed Koto Panjang Dam by borrowing from the Japanese government. The dam construction has submerged all ten indigenous villages in the region of Koto Panjang. Therefore, all villagers had to accept resettlement program. The Koto Panjang Dam project has successfully resettled around households from eight villages of Riau province and two villages of Sumatra province. The process of resettlement has continued for more than 10 years between 1991 and Constructing the Koto Panjang dam to generate electric power is more in the interest of industrial and business development rather than the interest of the Koto Panjang local community. So far, people of Koto Panjang have no complaint to run their life in their own indigenous villages. Their ancestors have never thought of losing their place of birth for ever life. Resettlement has never been the product of villager s traditional consensus. It is the strategy of economic development decided by the state in order to make industrialization running faster. At the same time, the process of industrialization supported by better supply of electricity will create a better living for local people. Therefore, villagers have to accept resettlement program to enable the construction of Koto Panjang dam. The main goal of resettlement program is to improve the living standard of resettled peoples. Therefore, it is necessary to ensure that the outcome is resulting in expected outcome, better living condition after resettlement. However, a study reported that the outcome is not as well as expected by the resettlement plan. More than 67.8% of resettlers were reported to have a worse living condition (JBIC 2004). Only 18.2% of resettlers were having better living condition. Among the worst is Pongkai Baru in Riau province and Tanjung Pauh in West Sumatra province. In these two villages, more than 90% of resettlers are facing worse living condition. There are two villages, Koto Masjid, Pulau Gadang where more than 50% of resettlers are having better living condition. This study is an attempt to compare economic performance characterizing the success of Koto Masjid and Pulau Gadang, and the failure of Tanjung Pauh and Pongkai Baru. By using primary data from households survey conducted in 2004, we study how differences in the two groups of villages by the level of economic development in the sense of compensation received, the ownership of rubber plantation, and the level and the distribution of income. 2. Involuntary Resettlement and Economic Development The most serious socioeconomic outcome of dam construction is involuntary resettlement. The construction and inundation often ignored the living condition of resettled peoples. It is often assumed that resettled peoples somehow will benefit from the dam. However, in many cases, involuntary resettlement due to dam project has taken placed under the threat 1

2 of violence. Resettled families lose homes, land, food sources, and employment. They are even exposed to social dislocation (CERNEA 1990; Baviskar and Singh 1994). Involuntary resettlement does not necessarily lead to economic development as expected, but it is potentially creating the process for impoverishment risks. The process is characterized by landlessness, joblessness, homelessness, increased morbidity and mortality, food insecurity, marginalization, loss of access to common property and community disarticulation. The impoverishment of displaced people is often the central risk in development-caused involuntary population resettlement. Cernea has developed a Risks and Reconstruction model counter the impoverishment risks (Cernea 1997). The model is necessary to internalize the loss of natural, physical, human and social capital caused by involuntary resettlement. Appropriate rehabilitation programs are required to restore the loss of productive capacity. It is important to protect and reconstruct displaced people s livelihoods by implementing an equitable resettlement program (Cernea 1997). Resettlement may lead to the deterioration of production system. This results in food insecurity, marginalization and loss of income. The deterioration may arise from the loss of productive capacity such as land, common property resources, jobs, and health and community articulation. This leads to precarious livelihoods, declining standards of living and uncertainty of production and development (Croll 1999). Loss of land sets the level of impoverishment in involuntary displacement (Mahapatra 1999). Expropriation of land removes the main foundation upon which people s productive systems, commercial activities and livelihoods are constructed. This is the principal form of decapitalization and pauperization of displaced people as they lose both physical and man-made capital (Cernea 1997). It isn't enough just to re-establish those ousted from their previous situations. Rather, the goal should be to re-establish the oustees in such a fashion that they can experience sustained economic growth in the future, or sustained increases in per capita income (Schuh 1993). Production has been difficult to develop, not only because villages were frequently located in remote and inhospitable resource-scarce mountain regions, but also because relocation and development are insufficiently linked, in concept and practice. Frequently planning and preparation for production and development at the time of relocation are insufficient (Croll 1999). The risk of joblessness is also high. The construction of a dam and the reconstruction of a village lead to a temporary boom in employment. But employment severely drops toward the end of the project. This compounds the incidence of chronic and temporary joblessness among the displaced population (Cernea 2000). Joblessness among resettlers often surfaces after a time delay, rather than immediately, because in the short run they may receive employment in project related jobs (Cernea 1997). The mitigation measures to resettlement follow four frameworks: policy, legal, planning and organizational. It is necessary to develop production-based strategies for resettlement that can improve and the standard of living of resettlers after resettlement. It is necessary for planning approaches to avoid second generation negative environmental effects, such as increased land density and lower natural resource availability at host sites. So far, resettlement programs have a de facto lack of social justice and equity. Every development program that entails displacement must include a social equity compass to counteract impoverishment and avoid resettlement without rehabilitation. The Risks and Reconstruction model is necessary for guiding resettlement planning. The model can also serve as a diagnostic tool, with a predictive function and a problem resolution mode, for guiding rehabilitation. The model anticipates the risks of resettlement and aims to explain some of the behavioral responses of resettlers (Cernea 1997). Involuntary resettlement is characterized by four stages (Scudder 1997). The first stage is relocation; the second is adjustment to new situations and occupations. Along with the emotional and economic stress of readjustment, many endure a sharp fall in income and 2

3 standard of living. Also, because most people stop investing once they know they must move, income and assets at the time of relocation are lower than normal. Resettlement enters the third stage if economic development and community formation occur. The fourth stage consolidates. In most cases, resettlement does not reach the third stage. Therefore, it is necessary to develop an inclusive resettlement program to generate the gains of development, not just the pains for resettlers, for resttlers (Cernea 1999). The World Bank has provided guidelines on resettlement to ensure that the population displaced by a project also benefits from it (WORLDBANK 1990). It is emphasized that resettlement be implemented as a development program to make project-affected people become well off and borrowers are required to restore living standards. However, programs aimed at restoring living standards tend to leave the majority worse off, because the emphasis shifts from development to compensation and mitigation. With regard to compensation as incentives for resettlement, the reference always leads to Pareto optimum criteria. It is impossible to make one party better off without making other party worse off if Pareto optimum is already achieved. Some critics think that the Pareto welfare optimum is unable to explain why the displaced peoples becoming worse off. Social discontent and despair felt by displaced peoples due to the construction of dams does not appear in the calculation of Pareto optimum to guarantee that no one worse off (Goodland 1997). It is necessary to include the displaced and host populations in the beneficiaries of dam development. It is important to design a resettlement plan with a just and fair compensation so that resettlement actually becomes voluntary for most people displaced. There is a right price for voluntary resettlement; voluntarism is attainable when compensations make people better off. However, asset replacement through compensation will not prevent resettlers from becoming "worse off." Therefore, new assets must be created through investment in order to make the "catching up" process possible (Pearce 1999). So far, the reactive focus on mitigation and compensation precludes a developmental approach to the needs of project-affected communities despite the importance of large dam for the poor development effort (Cernea 2003). Involuntary resettlement dismantled production systems. Resettlers lost many jobs, much valuable land and other income generating assets. A massive displacement is only making the affected people worse off, it is also weakening the local and regional economy (Cernea 1996). However, resettlement can induce an improvement in individual as well as in social capacities to produce. At the same time, resettlement can also influence material wellbeing, access to cultural artifacts, physical health, psychological health, and changes in emotions toward housing and environment (WEBBER and MCDONALD 2004). 3. Methodology Present authors designed and conducted this survey for two goals. The first goal was to clarify the present living condition of resettled villagers, compared to that of before their resettlement. Second goal was to associate the present living condition with some cause so that inferences can be drawn on how to improve resettlement planning. Four villages, namely, Koto Masjid, Pulau Gadang, Tanjung Pauh, and Pongkai Baru, were selected as targets for this survey. These four villages were selected through reviews of various documents and preliminary interviews, the resettlers in Koto Masjid and Pulau Gadang were seemingly successful in re-establishing livelihood after relocation, while those in Tanjung Pauh and Pongkai Baru were not. All interviews, conducted in March and April 2004, were structured, using the questionnaire designed as above, and done in person to person, by the interviewers visiting each household. For each village, fifty households were randomly sampled. After carrying out the interviews, it turned out that some interviews were performed on households of 3

4 non-resettlers, i.e. those voluntarily transmigrated from the Java Island. These households were eliminated from the samples for analysis. The numbers of valid samples were 47 for Koto Masjid, 50 for Pulau Gadang, 45 for Tanjung Pauh, and 32 for Pongkai Baru. 4. Findings 4.1. Compensation: Distribution and Utilization As an incentive to accept the resettlement program, resettlers are offered compensation for all losses of property. According to the Koto Panjang resettlement scheme, compensation was provided for all types of property in terms of money. The value of compensation was based on negotiation with the owners of property. Table 1 shows the distribution of resettlers based on the value of monetary compensation received by sampled villages at the time of survey. Zero value of compensation implies the non-recipients. The proportion of non-recipient accounts for 24% of resettlers and the proportion of recipients accounts for 76% of resettlers. The value of compensation ranges between less than Rp 5 million to above Rp 15 million. More than 40% of resettlers received between Rp 5 million and below Rp 15 million. Less than 13% of resettlers received below Rp 5 million, but more than 23% of resettlers received above Rp 15 million. The non-recipients of compensation are found in every village, but the proportion of differs across villages. The highest proportion of compensation non-recipient is found in Pongkai Baru. Then it is followed by Tanjung Pauh, Koto Masjid, and Pulau Gadang. Koto Masjid and Pulau Gadang, better performing villages, show a lower proportion of compensation non-recipient, while Pongkai Baru and Tanjung Pauh, under performing villages, show a higher proportion of compensation non-recipient. Table 1. Resettlers by Value of Compensation and Villages (%). Village Compensation Received (Rp 000) Total 0 < > Koto Masjid Pulau Gadang Tanjung Pauh Pongkai Baru Total Source: Field Survey, With respect to monetary compensation received, there is a sharp contrast between better performing villages and under performing villages. Higher proportion of resettlers in better performing villages received higher value of compensation, while in under performing village s higher proportion of resettlers received lower value of compensation. The contrast is particularly large between Koto Masjid and Pongkai Baru. The proportion of resettlers receiving compensation above Rp 15 million is 34% for Koto Masjid and 3.1% for Pongkai Baru, but the proportion of resettlers receiving compensation below Rp 5 million is 21.9% for Pongkai Baru and 6.4% for Koto Masjid. However, all villages show that most resettlers received the value of compensation between Rp 5 million and Rp 15 million. Monetary compensation received by resettlers can be utilized for a range of alternatives. The most rapid utilization of monetary compensation is for consumption goods. Alternatively, the compensation money can be used for productive investment. A beneficial use of compensation money depends upon the capability of resettlers who received it in managing their money. Table 2 shows how resettlers utilized the monetary compensation received. It is evident that most resettlers spent their money to purchase land. Then it is 4

5 spent for food, education, motorcycle, and saving. Other types of spending such as for pilgrimage, starting business, and electronics are very insignificant among resettlers. The pattern of spending from monetary compensation is similar across villages, except for Pongkai Baru. Majority of resettlers in Pongkai Baru spent their monetary compensation for food and none for saving, but the highest for education, electronics and pilgrimage. It is important to note that spending monetary compensation is found only in Pulau Gadang. Table 2. The Use of Monetary Compensation (%) How did you spend the compensation (money) for House/land Koto Masjid Pulau Gadang 5 Village Tanjung Pauh Pongkai Baru Total Land Motorcycle Electronics Education Food Saving Hajj Business Total Source: Field Survey, Rubber Plantation The traditional economy of Koto Panjang indigenous people was based on rubber plantation. Rubber remains an important export commodity from Indonesia. Therefore, rubber plantation was planned to continue as engine of economic growth for Koto Panjang resettlement villagers. According to Koto Panjang resettlement program, every resettler deserves 2.5 hectares of rubber plantation for his or her agreement to accept resettlement. The survey has identified the presence of rubber plantation owned by resettlers as revealed by Table 3. At present, the ownership of rubber plantation accounts for 92% of resettlers. Before resettlement, the ownership of rubber plantation accounts for only around 55% of resettlers. The resettlement program evidently has raised the ownership of rubber plantation. When it is productive, it will act as an important source of income for resettlers. The ownership distribution of rubber plantation does not identically show the size of rubber plantation entitled to every resettlers. The main reason is the trading of rubber plantation which involving resetllers since the most important use of monetary compensation is to purchase land. As a result, around 6% of resettlers only owned rubber plantation for less than 2 hectares, while around 5% of resettlers owned more than 5 hectares. However, majority of resettlers own between 2 and 5 hectares of rubber plantation. The ownership of rubber plantation has become more equalized due to resettlement program. Before resettlement, almost 45% of resettlers did not own rubber plantation at all. Now, the non-rubber owner is left only 8%. The ownership of rubber plantation in the size between 2 and 5 hectares has increased more than three times, while its ownership in the size below 2 hectares, between 5 and 10 hectares, and above 10 hectares has decreased substantially. The concentration of rubber plantation ownership has decreased as a consequence of resettlement program in Koto Panjang. An improvement in the distribution of rubber plantation ownership has taken place in every resettlement village. Table 3. Distribution of Resettlers by Size of Rubber Plantation Owned (%) Size of Rubber Plantation Owned (ha)

6 Village 0 < >10 Total Koto Masjid Before After Pulau Gadang Before After Tanjung Pauh Before After Pongkai Baru Before After Total Before After Source: Field Survey, Economic Development: Income Growth, Distribution and Poverty Involuntary resettlement is expected to bring economic development a reality to resettlers. This study associates economic development with higher income, better income distribution, and lower rate of poverty. The survey has asked resettlers family income before and after relocation. By using these data, we can show average family income and the distribution of income, and poverty level. To measure poverty level, average family income as much as Rp 500,000 per month is used as a family poverty line. Then, the proportion of resettlers below poverty line is the proportion of poor resettlers. We show the results in Table 4. On an average for the whole village, average family income increases from Rp 1,1 million before relocation to Rp 1,3 million after relocation. Resettlement program seems to have changed the relative economic position of villages. In terms of average family income, it is evident that poorer villages have become richer, while richer villages have become poorer. Resettlement has raised the level of family income for Koto Masjid, Pulau Gadang and Tanjung Pauh, but it has reduced for Pongkai Baru. Income growth clearly reflects the contrast between better performing Koto Masjid and Pulau Gadang with better living condition and under performing Pongkai Baru and Tanjung Pauh with worse living condition. Before relocation, there were more than 5% of resettlers having zero monthly income, it then fell to less than 1% after relocation. The effect of resettlement program on economic performance does not only increase the level of income received by resettlers, but it also tends to improve the distribution of income among resettlers. The proportion of resettlers at a lower income bracket is decreasing, while the proportion of resettlers at a higher income bracket is increasing. Before relocation, there were more than 69% of resettlers belonging to a monthly income below Rp 1 million. After relocation, the proportion of resettlers belonging to the same group declined to 57%. In contrast, the proportion of resettlers at an income level above Rp1 million rose from 25% before resettlement to 42% after resettlement. As a result, the poverty rate has decreased from 46% before relocation to 31.6% after relocation. Table 4. Distribution of Resettlers by Family Income (%). 6

7 Village Income Class (Rp 000/month) > < Total Average Family Income (Rp) 1. Koto Masjid Before ,085 After ,598,936 2.Pulau Gadang Before ,600 After ,046, Tanjung Pauh Before ,111 After , Pongkai Baru Before ,095,938 After ,438 Total Before ,138,736 After ,300,977 Source: Field Survey The condition of income distribution and poverty varies across villages. In Koto Masjid and Pulau Gadang, higher family income is followed by better income distribution and lower poverty rate. In contrast, a lower family income in Pongkai Baru and Tanjung Pauh is followed by worse income distribution. Worse income distribution is followed by higher poverty rate in Pongkai Baru, but lower poverty rate in Tanjung Pauh. 5. Conclusion The process of economic development following the resettlement program of the Koto Panjang Dam Project is associated with the presence of monetary compensation, productive capacity, the level and the distribution of income. Better off villages received higher level of compensation and used the compensation more for productive assets. More productive capacity in terms of rubber plantation is found in better off villages. Family income is higher and substantially increasing in better off villages. While in the worse off villages, family income is slightly increasing in one village, but it significantly decreasing in another village. An increase in the level of family income is followed by a better income distribution and a lower level of poverty. The opposite is also true for a decrease in the level of family income. Income distribution is worsening, and the level of poverty is increasing. An improved standard of living is related to better productive capacity, higher level of income, better income distribution, and lower level of poverty. Impoverishment risks are lower in better performing villages, reflecting better condition of productive capacity. The presence of productive capacity building is urgent to guarantee the success of involuntary resettlement program in achieving an improved standard of living for displaced peoples. References Baviskar, A. and A. K. Singh (1994). "Malignant growth: The Sadar Sarovar dam and its impact on public health " Environmental Impact Assessment Review 14: CERNEA, M. M. (1990). "Internal Refugee Flows and Development-Induced Population Displacement." Journal of Refugee Studies. 3(4):

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