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Subject: E Timor's wealth: blessing or curse?
E Timor's wealth: blessing or curse?
By Lucy Williamson
BBC News
One day, perhaps, the place where Isabel sits will be a five-star hotel,
its private villas looking on the beach, its grand entrance frowning
down on the western corner of Dili's beach road.
But for now, six years after independence from Indonesia, there is just
Isabel.
Her flimsy bamboo stall shades her from the sun's glare, her tiny piles
of tomatoes and garlic are waiting naked in the afternoon heat for a
sale.
Six years of independence, and East Timor's capital city is holding its
breath.
Two governments, multinational forces numbering thousands, billions of
dollars of international money - and yet people like Isabel are still
saying life was better under the Indonesians.
"People could afford to buy things then." she said. "Now we just sit
here at the stall all day, and perhaps we'll earn a dollar or two."
Economic lifeline
It is ironic, then, that East Timor has been held up in the past few
years as an economic role model - ironic, too, that it has done this by
sitting on a large and growing pot of oil savings.
Oil and gas - buried under the Timor Sea - are what give East Timor a
future.
They underwrote its independence after the Indonesian army left, taking
with them the area's economic lifeline and destroying its sparse
infrastructure on their way out.
So far East Timor has built up a fund of about $3bn (?1.63bn). It may
not sound like a lot but for a population of fewer than a million
people, in a country where a budget of $300m has proved hard to spend,
it is a fortune.
But this economic blessing also comes with a warning. No country like
East Timor has ever managed to use a sudden influx of oil money to
create a stable and transparent economy.
The developing world is dotted with examples of what economists called
the Resource Curse - too much easy money flooding the system, bringing
with it inflation, corruption and the death of any private enterprise.
Can East Timor prove that it can, in fact, be done? That taking oil and
gas out of the ground can be good for the host country as well as its
customers?
Spending spree
Until now, it has largely avoided the usual tripwires.
East Timor's Petroleum Fund was modelled on Norway's - considered to be
perhaps the best in the world - and wrapped in safeguards that prevented
governments from frittering away the country's future.
But as the account grows, and the frustration of people like Isabel
begins to nag at their leaders' consciences, the money is starting to
burn a hole in the government's pocket.
This year, for the first time, the government dipped into the fund
itself. In addition to withdrawing its usual sustainable amount -
basically the interest on the savings - it took a slice of the capital
to help fund a 122% increase in the annual budget.
Spending some of East Timor's oil money is not necessarily a bad idea.
Oil and gas revenues currently make up more than 95% of the government's
income and there is a pressing need to create a more stable mainstream
economy for when those resources run out.
But most of the extra money in this year's budget was to enable the
government to subsidise rice and fuel prices - not exactly a
contribution to Timor's long-term growth.
And the finance minister herself admits this was more about avoiding
potential instability than building a future economy.
Budget race
East Timor's beauty is startling. But you do not have to drive that far
south of where Isabel sits at her market stall for the road to peter out
into a mountain track.
And try paying for that long and bumpy journey by credit card, or even
arranging a taxi after dark, and it is obvious why the five-star hotels
are not being built.
East Timor needs roads, electricity and education - and the government
knows it.
But red tape and lack of capacity have made it difficult to spend here.
So Prime Minister Xanana Gusmao has recently dismantled some of that
bureaucracy, issued tight budget deadlines and started a private
ministerial spending race - with a bizarre scoring system based on
fruit.
Each ministry now lives in fear of this surreal internal ritual. Spend
more than 80% of your budget and you are labelled with a durian fruit -
the Timorese government equivalent of a gold star.
No-one wants to be a banana - the lowest spenders in the cabinet.
The result, critics of the scheme say, is a raft of rushed, badly
thought-out projects, many of which seem to have stalled.
The tender processes have often been very short - sometimes a matter of
weeks.
Civil society groups - and the opposition - complain they are being kept
in the dark, and ministry insiders say corners are being cut, opening
the door to corruption.
All of which has landed a few strongly worded letters on the prime
minister's desk - some of them from Timor's international partners,
worried at the precedents being set.
But this young country still has a shot at getting it right and showing
the world the curse can be avoided, and that is really because it has
two things going for it.
One is a strong and vocal civil society and a vibrant opposition. The
other is its size.
Ironically, East Timor's lack of development and its small, scattered
population allow it to look for what some experts term a "21st Century
solution" to development - nimble, decentralised programmes that focus
on training and mobile services.
So much advice, so much criticism - many ministers sound a little inured
to it now.
As the deputy finance minister told me recently: "Sometimes we worry too
much. If we worry too much about expenditure, then you also have no
result in the end."
True enough. But worry too little, and the result might also be the
same.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/asia-pacific/7629881.stm
Published: 2008/09/24 01:09:02 GMT
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