Also AU: Editorial - Timor must learn to spend wealth wisely; SCMP: Tough warning to newest nation

The Australian

July 27, 2005 Wednesday All-round Country Edition

Timor leader 'furious' over corruption report

Mark Dodd, John Kerin

A SOBERING World Bank report warning East Timor's Government to tackle corruption or face civil conflict has been rejected by a "furious" Prime Minister Mari Alkatiri but warmly welcomed by public advocacy groups in Dili.

The 95-page report, obtained by The Australian, raises serious concerns about the level of expertise available in Dili to manage up to $40million a year in revenue from the oil-and-gas-rich Timor Sea.

The report says peace and stability in East Timor remain fragile, with the population becoming increasingly dissatisfied with the Government, a situation that could trigger civil conflict.

Attending an ASEAN summit in Laos, East Timor Foreign Minister Jose Ramos Horta, while admitting the situation was fragile, played down the World Bank report card on the world's newest nation, which is struggling to rebuild from the devastation wrought by Indonesian-backed militias in 1999.

"If you read it thoroughly, the World Bank report is very optimistic about East Timor," he said.

"They warn about the dangers but that's all. The Prime Minister is furious.

"We are doing very well, the country is very much at peace. We have a dynamic multi-party system -- 12 parties in the parliament."

Cecilio Freitas, of the Dili-based NGO East Timor Peoples' Action party, which is running a public-awareness campaign warning of the dangers posed by corruption and nepotism, endorsed the report.

"Corruption is becoming a heartache for many in East Timor, especially corruption at Dili port and the Batugade border (with Indonesian West Timor)," he said.

"Senior Fretilin officials are also involved in peddling influence," Mr Freitas told The Australian, referring to the ruling party.

A spokeswoman for the World Bank described the report yesterday as "reasonably frank", saying East Timor was at a crossroads.

Australia, one of East Timor's biggest donors, runs an annual aid program worth $40 million.

Bruce Bilson, Parliamentary Secretary for the Ministry of Foreign Affairs and Trade, agreed East Timor faced serious challenges.

He said Canberra's primary aid focus was to help strengthen the country's institutions, especially public administration and the police.

"East Timor is moving from a period of conflict to that of a peaceful, democratic nation," he said.

Editorial -- Page 14

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The Australian

July 27, 2005 Wednesday All-round Country Edition

Timor must learn to spend wealth wisely

THE government of East Timor has done well since winning independence from Indonesia. Free and fair elections have delivered peace and political stability. Public spending is focused on infrastructure and health and education. But as Mark Dodd reported exclusively in The Australian yesterday, the World Bank warns the young country's rulers need to lift their game, with corruption beginning to be a problem. There is also evidence East Timor's elite is losing touch with the people. Portuguese is the official language, although it is only spoken by the governing group. Earlier this year the government found itself in a fight with the Catholic Church over a decision to drop religious instruction in schools. And why the Prime Minister's brother has a monopoly on supplying weapons to the army and police is not clear.

None of these issues are an indication of wholesale corruption, domestic revenues of just $US33 million this year make for slim pickings. But this will change as an anticipated $15 billion in royalties and taxes from Timor's share of offshore energy fields start to flow. The government will need to ensure this blessing does not curse the country with corruption and economic incompetence. Foreign Minister Jose Ramos-Horta is obviously aware Timor cannot afford to go the way of Nauru and fritter income from resource development. He says half the oil and gas income will be placed in a stringently administered and accountable trust fund. Good, but it will be no easy task to keep ambitious officials and old comrades seeking a share of the river of gold the fund will administer. And with too few jobs for a young population the temptation to spend money on make-work projects is obvious. Timor's politicians and public servants have done well up until now. But the hard part of nation building is only beginning.

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South China Morning Post

July 27, 2005

Tough warning to newest nation

Roger Maynard in Sydney

A report on the future of East Timor by the World Bank has painted a bleak picture of a nation in danger of imploding as it copes with the twin pressures of poverty and corruption.

The strongly worded assessment of the tiny state's prospects concludes that while it has performed better than other countries in the aftermath of conflict, its progress remains fragile.

"Establishing a well-functioning state will take years, if not decades," the report says.

East Timor, which is the world's newest nation, became independent from Indonesia after decades of fighting and a 1999 referendum.

Australia, its southerly neighbour, helped bring stability to the country by sending a large contingent of peacekeeping troops to establish law and order, and by contributing generously to infrastructure and development projects.

But six years later, major challenges remain, the World Bank concedes, acknowledging that the establishment of a functioning democracy would probably take decades.

"Governance and corruption problems are beginning to emerge," the report observes.

"Communication between the government and the population is inadequate and often ineffective, resulting in limited mutual understanding.

"Timor-Leste is at a juncture where it can consolidate gains and create conditions for sustained growth and poverty reduction, or descend down a path of poor governance, continuously increasing poverty and inequality and possibly renewed conflict," it warns.

Even the billions of dollars expected to be generated by oil and gas reserves beneath the Timor Sea could be at risk.

Commenting on the restricted report, the contents of which were exclusively published in yesterday's The Australian newspaper, the World Bank country manager for East Timor, Elisabeth Huybens, said last night that while the new nation's achievements had been remarkable, it was important to strike a note of caution.

"Timor-Leste is at a crossroads," she said. "It is blessed with rich resources and natural beauty ... but it must be vigilant in avoiding the tragic mistakes of some young nations whose wealth has proved to be a liability."