In Aceh, aid workers combat their inflationary effect

The outstretched hands of refugees gathered outside the airport here just days after the tsunami have now been partly replaced by the hands of entrepreneurs trying to shuffle prospective customers into cars and on to houses-cum-hotels in the city.

The majority of residents in this devastated city are still traumatized by what happened three weeks ago. But like those in Cambodia, East Timor, Afghanistan, and other crisis hot spots, some locals are seeing the arrival of large-scale relief missions as a once-in-a-lifetime chance to make big bucks.

"A driver for UNICEF told me, 'This is the opportunity for us to collect as much as we can, so use your head. You must earn as much as you can right now,'" says Nouvand, an accounting student who worked as a construction consultant and radio announcer before becoming a translator after the tsunami.

Aid dollars are starting to grease the wheels of a local economy derailed by the disaster - but with the threat of some negative consequences, including inflationary prices and a "brain drain" of local professionals opting to serve foreigners. Criticized in the past for such unintended impacts, UN representatives say they are taking some steps to mitigate the problem.

"Afghanistan was the first major international operation designed on the principle of the small footprint," says Douglas Keh, spokesman for UN Development Program (UNDP) in Banda Aceh. "Since then, we have sought to minimize our presence."

Increased demand and reduced supply have already caused the prices of some staples to creep up in the wake of the disaster, with small and large market vendors saying that some of the most popular items, like rice and sugar, have risen between 10 and 20 percent. Peanuts and palm oil are up more than 50 percent. The higher food prices squeeze the budgets of ordinary Acehnese, whose average per capita income in 2002 was slightly more than $250 a year.

The sharpest increase by far has been in goods and services purchased by aid workers and organizations, such as sport utility vehicles, drivers, translators, and space in homes. Before the disaster, a car and driver that might have cost almost $50 per day in Banda Aceh might now go for almost $100 per day. Scalpers are buying large amounts of plane tickets and selling them for at least 30 percent above normal prices, and a four-bedroom house often rents for over $100 per day.

"The price of these things varies so much right now," Nouvand says. "Someone charges one price and then talks to their neighbor and they say they charged something different. Then they change their price."

In other countries where there have been massive aid missions, these specialized price increases have created something of a dual economy - one among ordinary Acehnese and another among foreigners and their local suppliers, who accumulate the lion's share of the post-disaster profits.

The dual economy can cause the loss of much-needed skilled labor. In countries that have seen large-scale aid missions, the scramble for labor between international organizations has driven some trained professionals, civil servants, teachers, and others with higher education to make more money as drivers, translators, and NGO administrators.

Despite the difficulty in solving this problem, the UNDP's Mr. Keh says more organizations are aware of the dangers that can stem from the sudden and enormous influx of cash and foreigners into a vulnerable area, and have been taking steps to avoid some of the pitfalls.

Keh points to new cash-for-work programs, like giving tsunami victims supplies and living expenses to rebuild their own homes, and giving them money to help remove rubble and clean the city - programs which are designed to reduce this inflationary impact, while providing jobs and other social cohesion.

Keh says the UNDP also now spends extensive time researching local pay scales before negotiating prices on houses, cars, and other necessities.

"In Afghanistan there was less competitive bidding, and coordination between UN programs was unprecedented in Iraq," he says.

But Keh and other organization leaders say there's still room for a lot of improvement in terms of coordination - something difficult to manage in the initial rush to provide relief for a disaster of this magnitude.

"Right now, no one is thinking about this kind of thing," says Pierre Legriene, food security adviser for Oxfam GB in Banda Aceh. "Now we are still in an unstable situation."

While many say some degree of price inflation is inevitable, and that it may be premature to think about the potential side effects of another massive aid mission while organizations are still trying to get out emergency relief, others say now, before the influx of organizations and money pours into the country, is the perfect time to start.

"It's not too early to give some attention to this because all the NGOs are coming," Mr. Legriene says. "Everyone is trying to act as quickly as possible, and we're still in an emergency. But if someone was to monitor the impact and how the negative impact could be reduced, it could improve the quality of intervention."