East Timor pays price for freedom 

With infrastructure destroyed by militias and access to subsidised health care and education gone, the nation is struggling to make ends meet, writes Marianne Kearney

June 28, 2003 10:17pm

One year after formal independence and almost four years after East Timorese voted in a United Nations-backed referendum to split from its former occupier Indonesia, the world's newest nation is still dirt poor. Many residents still live in the burnt out shells of buildings, created when Indonesian-backed militias laid waste to 75 per cent of Timor's infrastructure. Two out of five people live on less than 55 US cents a day, half the population lacks formal education, unemployment is at 20 per cent in urban areas and there are few paid jobs outside the civil service or the United Nations Mission in East Timor. In Dili, East Timor's capital, the switch to the US dollar along with high transport costs has pushed the price of the most simple things - such as a $US1 plate of fried rice - beyond the reach of most people.

Much of the rural population lives in a cashless economy, making it difficult for many Timorese to even find US$2 a month needed to pay for their children's primary school education, say non-government groups. Two years into a harsh drought, one in six Timorese are stalked by starvation, the UN's Food and Agriculture Organisation warned this month. Although the tiny country's 800,000 residents no longer live under a harsh military rule, one year into formal independence, making enough money to survive is far harder than during Indonesian rule say aid groups. Gone are subsidised health-care, education, repair of the roads and the import of cheap Indonesian goods. The price of anything non-agricultural has skyrocketed.

Hopes were raised in March when East Timor and Australia signed the Timor Sea Treaty, splitting revenues 90:10 in East Timor's favour, adding about US$5 billion over 17 years to East Timor's coffers. The treaty will allow a consortium of international companies to export liquefied natural gas (LNG) from the Bayu-Undan oil and gas fields located in the Timor Sea. But despite the signing of this treaty, East Timor won't be jumping from one of the world's poorest countries to the Saudi Arabia of Asia, say experts. For a start the real money will not start trickling into Dili for another five years, according to Emilia Pires, the head of East Timor's Planning Department. Until then, Timor will receive only about US$100 million a year, which will heap wean the nation off foreign handouts, but provide only just enough to cover its extremely lean annual budget of US$84 million. "I don't think poverty can be solved with just oil money, Timor needs capacity building of the people, not just money, to improve their standard of living," said Ms Pires. East Timor realises that if the government went on a spending spree once the oil money started to flow, they would quickly run out of money, said Prime Minister Mari Alkatiri. Instead, the government plans to invest in high interest funds to ensure that country will still have a budget once the oil fields have dried up. Much of the country's tiny budget, a third of which is funded by foreign governments, only just covers basic health, education and the maintaining of infrastructure, the World Bank says. Basic services, three years after militia destroyed much of the infrastructure, means as much as 70 per cent of villages lack running water, large parts of the countryside do not have electricity, and there is little transport connecting the mountainous interior with the coast. Foreign aid groups have funded various health, infrastructure, and social service projects, but despite this East Timor can only afford to pay the salaries of half its trained health-care workers, and it suffers from a shortage of qualified teachers, particularly those fluent in Portuguese, the official language.

And the oil and gas industries will not be job spinners, points out the World Bank, particularly as the processing of oil and gas will be done in Darwin, north Australia.

In order to generate the kind of economic growth that will filter down to households, the fledgling nation will need to seek development and job-creation in labour-intensive areas such as farming, which employ most of East Timor's poor. Timor is casting around for new businesses and agricultural industries, such as high earning export crops like vanilla, spices and candlenut oil, said Mr Alkatiri. But this will take time. The country's one and only foreign cash crop, organically grown Arabica coffee beans, is no longer so lucrative. This is partly because of falling coffee prices, but also because Timor's plantations have not been maintained - not to mention the high cost of bringing the beans to market.

Other industries - such as fisheries, and niche tourism like diving and adventure packages - are also being explored. But East Timor would need to attract foreign investors to kick-start such businesses, and without spending more money on the country's services, such as power, telecommunications and roads, they will be hard to attract.

In the meantime, some observers fear that with international donors wanting to cut back on aid as oil money starts to flow, East Timor could be in for a difficult few years.

"If there is an overlap between when the oil money comes and before donors depart, Timor will be okay, but if aid gets cut before the money starts coming in it will be a disaster," said Charlie Scheiner, of Dili-based aid monitoring group La'o Hamatuk Both Australia and the United States have said publicly they will not cut back aid for East Timor. "Everybody wants East Timor to be strong," says Colin Stewart, the Jakarta director of the United Nations Mission in East Timor.

If donors such as Australia really want a prosperous and stable East Timor then they should not be trying to steal Timor's best chance at real oil wealth - an estimated US$20 billion worth of oil and gas in the untapped Sunrise fields, Mr Scheiner points out.

Located next to Bayu-Undan, these fields could be worth as much as US$30 billion, and according to current international sea laws are wholly within Timor's sea-boundaries, argues the Timorese government. But Australia claims the Sunrise fields are mostly located in Australian waters, as defined in a maritime border treaty it signed with Indonesia. It has said it will not re-negotiate the maritime boundaries, and blocked the chance for the dispute to be heard in an international court by withdrawing from the Law of the Sea Convention. Under the UN's Law of the Sea, which puts the sea border halfway between the two country's land borders, most of the Sunrise field falls into Timorese territory. Earlier this year Australia also threatened to block the Bayu-Undan fields by saying that it would not ratify the Timor Sea Treaty unless East Timor signed away 82 per cent of royalties from Greater Sunrise, which would flow to Australia, leaving just 18 per cent for East Timor. "That's US$20 billion which Australia is trying to take by refusing to negotiate," said Mr Scheiner. He says if Australia agreed to the boundaries that are recognised under international maritime laws, then East Timor would be guaranteed a financially stable future. Australia's own opposition parties have criticised the government's heavy handed tactics, saying the deal amounts to theft. The tough talking Mr Alkatiri, who previously accused Australian Prime Minister John Howard of using bullying tactics, says Australia should begin to negotiate on these boundaries if it wants Timor to succeed. "The only way to resolve this and to create stability in the region for investment is to start negotiations on maritime boundaries," Mr Howard said.

Publication: South China Morning Post

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