Subject: IPS: Indonesia Still Main Economic Lifeline

EAST TIMOR: Indonesia Still Main Economic Lifeline

By Sonny Inbaraj

DILI, Jan 11 (IPS) - As East Timor struggles to kickstart its economy, ironically, its former occupier Indonesia seems to be emerging as the territory's main trading partner.

On Jan 3, the first commercial flight to the capital Dili was from Jakarta with Indonesia's state-owned Merpati Nusantara Airlines conducting a maiden flight here after services were halted in September.

Merpati plans two flights each week to East Timor but no decision yet has been made on air fares between Jakarta and Dili, a company spokeswoman said.

''We are still waiting for a decision on air fares as well as waiting for the new Indonesian interests section office to be opened in Dili, which is expected later this month,'' she said.

Likewise, the Indonesian interests section is scheduled to be opened on Jan 27 by President Abdurrahman Wahid during a visit to East Timor, which in August voted to break away from Indonesian rule.

''This will indicate a normalisation of ties between East Timor and Indonesia,'' said Gil Alves, an East Timorese businessman who has returned home from Jakarta.

''It makes sense for East Timor to rely on trade with the Indonesian ports of Surabaya and Denpasar rather than Darwin in northern Australia,'' added Alves.

Explained Alves: ''Though Darwin is only 500 km away from Dili, the Australian freight charges and the port handing costs are just too expensive. Coupled with that we have to comply with very stringent Australian quarantine regulations which adds on to the shipping charges.''

At present most investment in the fledgling nation has so far come from Australia, with Darwin as the main staging ground for the movement of goods.

But, according to a recent World Bank assessment, acute shortages are leading to spiralling prices. An ad hoc price survey, by the World Bank, indicated a rise in the consumer price index for poor households in Dili by some 200 percent between August and October.

Since the Indonesian rupiah is the de facto legal tender in East Timor, it makes sense, says the World Bank, to exchange goods and services with Indonesia. The Bank, in its assessment report, recommends restarting the flow of goods and services, including an agreement on border trade, with Indonesia-controlled West Timor.

The UN chief in East Timor, Sergio Vieira de Mello, agreed with the World Bank view.

''It is clear to me that West Timor in particular and other areas like Surabaya and Denpasar will become the main trade partners of East Timor,'' he told reporters in Dili last week.

But certain East Timorese leaders within the territory's main political platform, the National Council of Timorese Resistance (CNRT), feel investment opportunities must be sought beyond Indonesia and full trading links be established with northern Australia.

On Sept 4, after the announcement of the results of the UN-sponsored referendum, Indonesian-supported militias went on an orgy of killing and destruction. It is estimated that more than 75 percent of the population was displaced in the weeks following the ballot results, and almost 70 percent of physical infrastructure destroyed or rendered inoperable.

According to human rights groups, more than 200,000 East Timorese were killed when the Indonesian armed forces invaded the territory in December 1975.

CNRT leaders Xanana Gusmao and Jose Ramos-Horta plan a regional tour on January 23 to canvass business opportunities from countries other than Indonesia.

Ramos-Horta told IPS the two independence leaders would leave for Singapore, the Philippines, Thailand, South Korea and China.

''This is a great opportunity to seek investment in agriculture and tourism,'' Ramos-Horta said.

''There is tremendous agricultural potential along East Timor's south coast very the country is very fertile. The production could feed the entire population and be exported to northern Australia,'' he added.

But Andrew MacIntyre, associate professor of Pacific International Affairs at University of California, San Diego, argued that East Timor had a clear interest in good rather than bad relations with Indonesia.

''East Timor needs to pursue a policy of functional diplomatic engagement with Indonesia. Notwithstanding the past violence and tension, as a matter of priority East Timor needs to work to find a means for diplomatic coexistence and if practicable, cooperation,'' said MacIntyre.

''There would be many advantages to East Timor if this were so,'' he added.

But MacIntyre pointed out that East Timor would need to secure its membership in the Association of South-east Asian Nations (ASEAN) in order to cement its credentials with the region as an entity independent from Indonesia.

Ironically, however, it seems Wahid is keen for East Timor to join ASEAN -- turning the page on two decades of bloodshed to launch a new era of ties.

In November he secured agreement from Thailand's Prime Minister Chuan Leekpai to support any eventual bid by East Timor for membership in the regional grouping.

Wahid told Chuan he hoped Indonesia and East Timor can forget the past as the territory becomes independent after a brutal quarter-century of Indonesian rule.


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