Tsunami in Sumatra
Has Turned Economy
Upside Down, Too

BANDA ACEH, Indonesia -- Halcrow & Associates lost six of its 45 employees here to last month's tsunami. Then foreign relief agencies started to lure away the survivors.

By last week, Nigel Landon, the British consulting firm's team leader, was so desperate to save its large irrigation project from collapse that he drove from aid agency to aid agency to find out what kind of pay the charities were offering to steal away his staff. He found the answers dismaying.

"We can't double our salaries overnight," he said afterward. "We don't have the financial freedom" that the private charities do during a natural disaster that has drawn world-wide attention and huge donations.

The economy of Banda Aceh has been turned upside down by calamity, generosity and opportunity. The earthquake, the tsunami and the arrival of thousands of foreign aid workers bearing food, goods and money have combined to warp prices, wages and rents in this devastated city at the northern tip of the island of Sumatra. The price of salt is up because the coastal salt makers have been wiped out. Beef is down because of fear of disease. Fresh fish is up, but few want to buy any. Rumor has it that fish are contaminated because they have been feeding off corpses swept out to sea.

WAVE OF DESTRUCTION See complete coverage of the earthquake and tsunami in South Asia.

Nowhere has the uproar been more pronounced than in the housing market. Perhaps half the homes in Banda Aceh were destroyed by last month's earthquake and the tsunami that followed, leaving more than 125,000 people around the city living in tent camps, according to the United Nations. Now not only do the survivors need housing, but so do the aid workers here to help them.

When the aid agencies came to town, Aswin Rahman, a retired Indonesian central banker, decided to rent out his new home in Banda Aceh, a two-story, four-bedroom house with dark wood trim, white-tile floors, a manicured garden and a cathedral ceiling in the living room. Before the tsunami he might have gotten just $300 a month. With a guerrilla war under way in the area, the Indonesian government had barred most foreigners from living here or even visiting.

So Mr. Aswin jumped at the chance when the aid group Mercy Corps -- the top bidder of eight -- offered him $1,400 a month. "First, I wanted the aid agencies to be here to help the community," Mr. Aswin said. "Second, the money compensates me for the inconvenience." He should have waited. A week later, Mercy Corps had to pay $4,000 a month for another office/residence to house its expanding staff.

Eventually Indonesians will repair the damage and the housing supply will expand. Foreign donors have pledged $1.7 billion for reconstruction in Aceh province. But for the moment, Banda Aceh is cleaning up, not rebuilding.

That means Said Firdaus, the 35-year-old owner of Rajawali Furniture, has no customers for the polished dining-room sets and entertainment centers his carpenters make. Moreover, Mr. Said has seen a surge in the price of nails, finishes and wood. His only client at the moment is a Swedish aid organization that is paying him $390 apiece to build 20 two-stall, white outhouses with zinc roofs and turquoise squat toilets for the refugee camps. His monthly profit has plunged about 75%, to roughly $400. He expects his business to boom when rebuilding begins.

At Lambaro market, Marhaban, a 48-year-old poultry dealer smeared with chicken juices, wouldn't budge when two women in head scarves offered him the pre-tsunami price of 20,000 rupiah -- about $2.25 -- for a scrawny chicken. Mr. Marhaban, who like many other Indonesians uses only one name, wouldn't part with it for less than $2.60. The tsunami decimated his own flock, so now he has to bring in chickens from the city of Medan, a 12-hour truck ride across the mountains. Before the disaster, he sold 500 chickens a day; now he's lucky to sell 150. "The situation is very unstable right now," he said.

Fishmongers are in worse shape than poultry peddlers are. Many fishermen were killed or left boatless when their coastal villages were crushed. Many fish sellers died, too. One who survived is Ismail Husein, who lost his wife and their five children to the tsunami. His stock at Sibreh market, less than 10 miles outside Banda Aceh, consists of just a few small blue tuna and other fish shipped from across Sumatra.

Counterbalancing the short supply is diminished demand. Worried about contamination, many people here are afraid to eat fish these days. So while Mr. Ismail is charging more per fish now, he is selling fewer of them. His pre-tsunami daily profit, about $11.25, has been cut by 80%.

In the beef market, demand has fallen faster than supply. To stretch their rupiah in tough times, Indonesians tend to buy more rice and less beef. Many buyers believe beef isn't safe because flies land on the corpses still littering the landscape and then on the meat that sits in the open all day at the markets.

Razali, a 52-year-old butcher, has watched beef prices at his flimsy, blood-stained wooden stand fall from about $3 a pound to about $2.60 since the tsunami. "I guarantee my meat is clean," he said, shooing away dozens of bottle-green flies.

The Indonesian government's food logistics agency, Bulog, keeps an eye on the prices of staples, especially rice. The agency maintains a 30,000 metric ton rice stockpile in warehouses around Aceh province and has released 5,000 tons into the market to keep the price near its target of roughly 15 cents a pound. The government is considering intervening to reduce the prices of sugar, flour and palm oil, said Tito Pranolo, Bulog's director of business development. "The market is not working right now."

A good deal of the problem, he said, is the fierce competition for truck freight from Medan. Aid groups use the undamaged city as a distribution center and have hired fleets of trucks to carry relief supplies to Banda Aceh, pressing up costs for private traders.

Aid agencies are also bidding up the price of cars, thousands of which were destroyed by the tsunami. Irfan Juliansyah, 34, used to have a one-man-band act playing "My Way" and other standards at the Kuala Tripa Hotel restaurant. The tsunami flattened the hotel, so he now rents his flashy Daihatsu jeep to Catholic Relief Services and hires himself out as its driver. As a musician, he earned about $540 a month. His jeep pulls in $1,800 a month, a huge sum in a country where per capita income was $710 in 2002, according to the World Bank.

Aid agencies eager to assist the needy and media outlets competing to get the story have been hunting for translators and skilled local professionals. They often end up hiring talent away from local universities, government agencies and businesses such as Halcrow & Associates, which has lost 20% of its staff to the disaster and to competing employers. In previous crises from Somalia to Afghanistan, international charities addressed the quandary by engaging in informal price fixing. The heads of the major aid organizations figured out the going wage rates, then agreed that they wouldn't raid one another's staffs by upping salaries.

So far, however, there has been no such charitable nonaggression pact in Banda Aceh. "It's a little cutthroat," admitted one veteran relief worker here. "It's not as amiable a disaster as some I've been in."

Write to Michael M. Phillips at michael.phillips@wsj.com