ABSTRACT
Construction of the Koto Panjang Dam was initiated in response to the rapidly increasing demand for electricity in the central region of Sumatra, Indonesia. The process of resettling the villages affected by this construction lasted from 1991 to 2000. The economic factors related to this resettlement programme include monetary compensation, productive capacity, and appropriate distribution of income. Better-off villages (such as those where a rubber plantation was found) received a higher level of compensation and used this compensation to purchase productive assets. Increasing the level of a family’s income generates better income distribution and a lower level of poverty, whereas decreasing it creates worse income distribution and a higher level of poverty. The presence of productive capacity is necessary to guarantee the success of an involuntary resettlement programme that attempts to improve the standard of living for displaced peoples.
