Timor-Leste: Goodbye conflict, welcome development? – The Diplomat
September 29th, 2011
‘Goodbye conflict, welcome development’ runs the panglossian banner on the Timor-Leste Finance Ministry website, and after centuries of sleepy Portuguese colonialism followed by a quarter-century of scorched-earth Indonesian occupation that killed an estimated 1/4 – 1/3 of the population, the Timorese are due an option on optimism as much as anyone else.
Making the slogan a reality is a different story, however, and independent Timor-Leste started from a low base, with most of the country’s infrastructure obliterated by the departing occupiers and their local militia proxies, after Timor-Leste voted for secession in 1999.
After a receiving an estimated US$6-8 billion in foreign assistance since 1999 and around the same in petroleum revenues since the mid-2000s, the numbers by themselves suggest Timor-Leste should be well-placed to make that leap the Finance Ministry aspires to.
However, early signs are mixed. Despite the black gold and Government spending boom of recent years – growth is around the 10% mark – Timor-Leste has nothing to sell to the world outside, aside from energy resources and coffee. Even then the latter leaves the country mostly unroasted and unprocessed, so the value gets added outside.
Sounds like a tough place to do business but one man giving it a go is Brendan Morias, a Singaporean who stayed on after working as Protestant missionary to open the popular RnR cafe not far from the UN Mission HQ. “Elsewhere your input costs might be around 20% for a café like this, but here in Dili it is closer to 40%”, he told The Diplomat
Import-reliant, even for basics like bottled water, Timor-Leste has a huge trade deficit, and despite the poverty of a country with a non-petroleum per capita average annual income of around US$400, living costs can be high, partly as most things in the shops are brought in from outside. “There is no such thing as buying wholesale here”, lamented Mr Morias, “everything is bought at in shops, and those goods are mostly imported”.
On the plus side, most of the country’s energy revenues go into a petroleum fund, set up to ensure that the country has savings in the bank once the wells run dry, which could come as soon as 2040 according to some estimates.
While the country’s leaders have been commended for being the first Asian country to meet standards set by the Extractive Industries Transparency Initiative and for the establishment of the petroleum fund – the temptation to dip into the largesse has proven too much, it seems. 95% of Government spending comes from petroleum revenue, but the country’s self-imposed he rules say that limits the amount the Government can draw down each year to an “Estimated Sustainable Income”,which is calculated as 3% of the total value of the money in the country’s petroleum-based Sovereign Wealth Fund as wel as the expected future revenues from the oil and gas fields.
Nonetheless, the national budget has ballooned beyond the ESI limits, since big money revenues started to accrue in 2007, and the 2012 budget is marked up 35% from the 2011 spend. Surely no coincidence that elections are scheduled for mid 2012?
As expected, government officials talk up the benefits of the outlay, and dismiss notions of electioneering. Speaking on the sidelines of a United Nations Development Program (UNDP) ‘aid effectiveness’ seminar in Bangkok, Helder Da Costa of the Timor-Leste Ministry of Finance pointed out to The Diplomat that World Bank/IMF figures show poverty in Timor-Leste declining over the course of the current administration – a multiparty coalition headed by former resistance hero Xanana Gusmao.
He contrasted his Government’s record with the predecessor Fretilin administration, which he claimed presided over “a doubling of poverty between 2003 and 2007”. Elections will take place in Timor-Leste next year, and the now-opposition Fretilin party is confident it can regain government, with opposition MP Jose Teixeira citing popular anger at corruption in the current Government, when The Diplomat interviewed him in late August.
The election will be supported by foreign donors and advisors, and Dr Da Costa said his country appreciated the overseas aid. He qualified that, however, by saying that “many estimates say that the aid money is spent in Timor but not on Timorese”. One such attempt to make sense of the figures – not an easy job by all accounts – was done by Lao Hamutuk, a NGO based in Dili that monitors development in Timor-Leste. It estimates that around US6billion has been spent in the country since 1999, but only around 10% of that has stayed in the country.
Getting a handle on aid numbers is difficult in most countries, and in the case of Timor-Leste, is addled by the diverse array of contributors and actors – from Cuban doctors, Chinese construction, Australian soldiers, World Bank consultants, Portuguese teachers and police, NGOs – with the diverse spread perhaps accounting for why so much of the aid money apparently went on staff costs, administration, consultancy fees and the like.
Ed Rees worked in Timor-Leste for Peace Dividend Trust, an initiative that sought to help boost small businesses and spark entrepreneurship in the new state. Weighing up the feeling on the ground about the international aid effort, he said “It is in many ways a self serving industry despite its altruistic imperative, and the Timorese frankly are annoyed with it, and with us.”
From time to time, Timorese politicians have taken to populist polemics against aid, in particular focusing the UN, which ran Timor-Leste as a protectorate from 1999-2002 and is currently in its fourth mission incarnation. The US agrees – in part at least – with a cable from the Embassy in Dili describing the UN presence in Timor-Leste as a “good case study of a serial UN peace operation that looks more like a complicated tango dance rather than a textbook continuum from peacemaking to peacekeeping and then peacebuilding.”
Some activists say that aid, while needed, has been misapplied, and in Timor-Leste there has been an over-emphasis on political and security related issues, rather than focusing on building a viable domestic economy. In an email to The Diplomat, Charles Scheiner of Lao Hamutuk took issue with with what he called “disproportionate donor attention to the ‘security sector’ in a country where homicide took 39 lives last year, while more than 2,000 children under 5 years old died from avoidable or curable conditions”.
Timor-Leste almost lapsed into civil war in 2006, and memories of that seem to live on. However, it could be worse, as Timor-Leste is at peace and is a warts and all democracy like any other. In a what wags might slate as an attempt to bankroll that country back to the Stone Age, war-wracked Afghanistan has received US$57billion in overseas assistance since 2002, according to estimates given by the country’s Finance Ministry at the same UNDP event where The Diplomat spoke with Helder da Costa.
For all it’s teething problems, Timor-Leste feels it has something to offer to the world outside – intellectual capital to offset the absent physical exports, perhaps. Da Costa will accompany Prime Minister Gusmao to another new state – South Sudan – in the coming weeks, as part of Timor-Leste’s leadership of the g7+ initiative, which is a brainstorming of post-conflict, aid recipient countries who are trying to get donors to listen to receiver’s side more when it comes to aid management. “We hope to share some do’s and don’t with the new South Sudan government”, said da Costa.
- Roughneen was in Timor-Leste in August