-No rupiah please, this is a free East Timor - East Timor charms visitors with its bare simplicity - Cross-border direct trade await legislation

The Jakarta Post June 10, 2002

No rupiah please, this is a free East Timor

Sinurana de Yesus, a roadside trader of basic commodities, answered every question posed to her by an Indonesian reporter for a Dutch radio station.

Then came the best question, "Do you accept rupiah as legal tender?"

"No. The rupiah is worthless because all the Indonesians have fled for good," replied the tough-talking de Yesus.

The trader was obviously not joking, although her spontaneous reply made the crowding bystanders burst into laughter.

She was right. The rupiah has disappeared along with the "ex-colonialist" Indonesians.

"The U.S. dollar is better because it is stronger and we are proud of it," de Yesus insisted.

The Indonesian currency, however, is still traded in money changers at a fixed price of US$1 for every Rp 10,000.

The choice of American dollar as the official currency since East Timor became independent had been a difficult choice. Nobody, though, knows for sure if the country will have its own currency some time in the future when it is economically strong enough.

The decision was taken at a time when the newly-born state had yet to establish its central bank.

"Ramos Horta (now the foreign minister) managed to convince lawmakers that the U.S. dollar was the best choice for a country which is yet to have a monetary system," Legislator Jacob Xavier told The Jakarta Post, recalling a debate on the official currency.

Xavier, a legislator from the Timor People's Party (PPT), was one of the politicians who proposed the Portuguese currency.

To use a foreign currency at this point in time is a wiser decision for East Timor than printing its own money. The biggest concern is if the country had its own currency now would it have any value on the international market.

"Until we have a monetary system, central bank and a sound economy, we'd better have the U.S. dollar for better or worse," said Helder da Costa, director of the National Research Center, which is attached to the University of East Timor.

"With the dollar, we don't have to worry about convertibility and supply." he told The Jakarta Post.

But the use of the U.S. dollar also brings its own curse. The greenback makes exports uncompetitive while imports become expensive; labor costs soar and tourism becomes unattractive because potential visitors are discouraged by the expensive transport system and costly facilities.

"So if people in Darwin had the choice between spending $700 for a return ticket to Dili, Bali or New Caledonia, they are likely to skip Dili for obvious reasons, said da Costa.

East Timor's leaders cherish the hope for their own currency some day when the state economy will be viable and has a reasonable bargaining position on the international market.

The constitution stops short of explicitly stating the official currency. The chapter dealing with the monetary and taxing system requires the government to establish a Central Bank, which has the "exclusive right to issue the national currency".

For the common people like de Yesus, who are of course unaware of the negative consequences and the worry shared by observers, the dollar still means good value.

"With only $5 you can buy things worth Rp 50,000." she said, laughing.

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