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Subject: Can Timor be independent? -- the economic argument
Date: Mon, 29 Jun 1998 15:54:16 +1300
From: sonny inbaraj <> Organization: The AustralAsian

Dear friends

I received this contribution from a regular reader who wishes to remain anonymous. This is in response to Dr Andrew McNaughton's "Can East Timor Be An Independent State?"

Warm regards,
Sonny Inbaraj
The AustralAsian

As East Timor struggles to define and attain its future within the convoluted, uncertain and dangerous political and economic climate of Indonesia under Habibie's "reformation", groups in the former Portuguese colony, led by the student movement, are developing contingency plans covering the mundane issues of economic and administrative needs for a free East Timor. These ask simple, non newsworthy, but essential questions about how East Timor will be run, and who will pay for it when it gains the freedom which the majority of East Timorese demand.

In a far from encouraging economic climate, finding the answers to how East Timor will survive economically is indeed a challenge. The Portuguese wrote the colony off as an economic basket case. Apart from sandalwood and coffee, the colony exported little. It was an unwelcome drain on Portugal's financial support for centuries. The Dutch had the richest slice of the East Indies cake with its lucrative spice trade from the Moluccas and Java. The Portuguese ended up with the least productive half island of the thousands in the Indies.

Since Indonesia invaded in 1975, how much has the situation changed? In truth, not all that much. Indonesia makes much of the investment it has poured into East Timor. It claims, rightly, that it has poured millions into the former colony. On a per capita basis, compared to other provinces, certainly East Timor has received far more than any other province. But where has the money gone?

Roads? Yes. Most are sealed, and provide ready access to most areas of East Timor. This facilitates military movement as much as economic development. Schools and education? Many have been built. But many do not operate effectively. Teaching quality is poor (there is no teacher training in East Timor) and teaching materials are scant. Medical facilities? Again, numerous rural health clinics have been built, but most remain empty and under or un staffed. The bulk of the medicines distributed end up in local markets, sold by the Health Department staff to augment their low wages. The bulk of the aid to East Timor has been used to develop administrative and military infrastructure. It's benefit to the people has been extremely limited.

No one can argue with Indonesia's financial management practices. The fall of Soeharto is proof. Funds may be allocated to provinces, but the filtering process results in a small percentage only getting through to those projects for which it is intended. The bulk ends up in two pockets: those in control and, in East Timor's case, military infrastructure costs.

Add to this the issue of the issue of the quality of what does eventually seep through, and you open a whole new can of worms.

What about investment in East Timor under Indonesian rule?

Sandalwood? Most trees were destroyed after the Government decreed that all sandalwood trees were Government property. The industry is all but dead. One small factory remains in Dili. Coffee? The army took over the industry, and ran it into the ground with low prices and extortion as its management trademarks. A coffee project focusing on cooperative development, financed by the US, is now winning back much of the coffee growers support, and promises to be a major source of revenue if the army can be phased out of control.

Oil? All is found off shore. The current Timor Gap deal benefits Australia and Indonesia in the first instance. No infrastructure is being developed in East Timor, apart from minor assistance to upgrading medical facilities in Suai. The contract does allow for a percentage of profits to be distributed to East Timor. That has not yet happened. And will it? Will Indonesia change?

Benny Moerdani makes money from fake marble mined from Manatuto, and exported to Singapore, from which it is reexported throughout the world as Italian marble.

All "development" is characterised by time honoured Indonesian cronyism and nepotism. Some East Timorese in high government positions within the colony have participated in and benefited from these programs. Retailing and wholesaling is dominated by non East Timorese.

So where are we now? Not a very encouraging scenario on which to base a free East Timor's economic growth. So where to start?

There are five realistic pillars on which economic development can be based:

Oil · coffee and cocoa · tourism · fishing rights · agriculture

Oil? The Timor Gap deal is a complex issue. The gap lies in waters belonging to Australia, Indonesia and East Timor. If East Timor gains its independence, renegotiation is a priority. Currently, $100 million per year is "earmarked" for East Timor, plus a percentage of the profits. Renegotiation of both rights and profit sharing could access at least $300 million per year.

Coffee and cocoa? This has great potential, and will thrive once ABRI's control is totally removed. Income from coffee in the last year of Portugal's rule was $60 million.

Tourism? Tourist infrastructure is almost non existent. And yet the country has immense potential. It is spectacularly beautiful. Eco tourism, skin diving, mountaineering, beaches; historical sites - its all there, backed by the genuine friendliness and need of the East Timorese themselves. Potential income? In the long term, tourism has the potential, given easier access to the country and development of facilities, of becoming a significant industry.

Fishing rights? Dozens of Taiwanese fishing boats flying Indonesian flags, using Javanese, Bugis and Molluccan crews under Taiwanese captains, freely poach the waters of East Timor. Proof? Those that are caught off Darwin don't fly there. This is not a major player, but would nonetheless contribute much needed funds.

Agriculture? Sugar has been mooted for development within the Viqueque area, but the technical advice from Australia is that rainfall is inadequate for success. Agriculture and small livestock development in the short term should focus on diversification and dry land cropping. For some time, the potential for exports remains limited, as East Timor is not blessed with either enough rainfall or widespread land resources suited for agriculture. Indeed, given the widespread malnutrition in the country, the initial priority has to be geared to self sufficiency.

However, one industry which could present potential is the raising of beef cattle, particularly on the southern coasts and on the Los Palos highland plains. Judging techniques for improving silage using native grasses, developed in the Northern Territory, this could be major industry. Drawbacks and difficulties are Timor's isolation and infrastructure limitations, and the prevalence of animal diseases which make England's mad cows look like saints.

As a snapshot, this scenario is not encouraging, but it provides a blueprint for further development. If someone in a kind hearted country was interested in providing investment support.