Subject: Timor's poor in peril amid plenty

Timor's poor in peril amid plenty

Paul Cleary

< http://www.theaustralian.com.au/ >The Australian

June 26, 2010 12:00AM

The oil dollars are flowing into Dili but not everyone's on the receiving end

WITHIN days of the Chinese government's handing over two patrol boats to East Timor, two much bigger ships from the US Navy anchored off Dili last week, bringing with them more than 2000 marines.

The marines arrived on board the USS Peleliu and USS Pearl Harbor for a joint training exercise with the East Timor army and the international stabilisation force, which includes Australian troops. It was a 2010 version of gunboat diplomacy.

It's not the first time the US Navy has been deployed to Dili for a goodwill mission, and it won't be the last, given the largesse spent by Beijing in buying influence in the oil-rich country.

The scale of these carefully orchestrated overtures by the world's superpowers are remarkable given they are directed at the tiny half-island state of East Timor, where half the population of 1.15 million lives on less than $1 a day. Oil best explains the interest.

In addition to "selling" the patrol boats, China's soft diplomacy has involved funding extravagant government buildings in the capital. It has built the president's pink residence in the foothills and the presidential palace, the foreign ministry's head office, and it has begun work on a new headquarters for the army and defence department.

For better or worse, oil explains most things about East Timor, past and present. It explains why this country of poor, largely semi-subsistence farmers has a future. Oil has been the driving force behind relations between Australia and East Timor for more than 35 years. The bitter negotiations over the Sunrise development are merely the latest instalment.

Four years since warring factions within the army propelled the country towards the brink of civil war, East Timor looks like a nation reborn yet again. The amount of development in the capital is staggering, with Australian and Asian interests sinking significant amounts of money into hotel and retail developments.

One of them is a huge Timor Plaza development backed by Timorese-Australian Tony Jape, who is building the first phase of a four-storey shopping complex. Jape's family landed in Australia as refugees, later building a similar complex in Darwin.

The first phase is expected to cost $10 million, as part of a $30 million development covering 5ha in the capital's sprawling western suburbs. Timor Plaza is responsible for one of two cranes that soar above the low-rise city.

International investors are also ploughing money into at least three up-market hotel developments.

All this is happening before the country introduces a land law, which is expected this year.

The dramatic transformation greatly impressed Olympic gold medallist Rosa Mota, who visited East Timor last weekend as a guest of President Jose Ramos-Horta. When Mota visited Timor three years ago she was too afraid to venture into the streets of Dili. This time, she felt much safer.

"I can go any time, any place, no problem. In 2007, no," Mota tells Inquirer.

The number of new retail outlets and the renovation of the Dili waterfront has impressed Mota, who won the Olympic marathon for Portugal in 1998. She joined Ramos-Horta on a 5km walk around the city as part of what was billed as a "peace marathon". Mota predicts big things for the little country. "I think it will be a big country," she says.

Despite the violence and upheaval since independence, Timor remains a laid-back place with little of the razor wire and electric fences common in the developing world. Dili is nothing like Port Moresby, where almost every residence is fortified.

Driving the changes is the oil money finally making its way into the community. The first government, led by Mari Alkatiri, took a tight-fisted approach to budget affairs and failed to spend. Admittedly, it had less money to play with. After independence the country's annual budget was about $100 million, but when oil revenue began flowing in 2004 it more than doubled. Weak government capacity meant up to half of this went unspent.

Prime Minister Xanana Gusmao is now working with a budget of about $1 billion, which is actually beyond the "sustainable" level of spending laid down by the law governing the petroleum fund. Gusmao's government argues strong public-sector spending has driven a sharp rise in overseas business interest. In the 2009 fiscal year more than 2,200 international businesses were registered, more than double the previous year.

Ramos-Horta tells Inquirer a 50 per cent increase in housing investment last year marks a significant act of faith by the community in the country's future, despite its lack of secure land title.

But these comments reflect the Dili economy, ignoring the one million or more people who live in rural areas, largely dependent on tilling small plots of land.

The lack of public-sector investment outside Dili is blindingly obvious, forecasting a serious development trap. A booming Dili economy will draw more people from the districts, leading to more youth unemployment, more gangs and more crime.

When Inquirer drives south from Dili into the central mountain range, it is obvious little of the new money sprayed around by Gusmao's government has made it into the districts. The main road that links Dili with the south coast is meant to be sealed but it requires a 4WD.

Driving through the Aileu valley, one of the main rice-growing centres, farmers who are walking several kilometres to their small plot hail a ride before explaining in direct terms what they believe are the country's problems.

Domingos Mosquita, a father of 10 who earns about $60 a month makes an astute observation about the state of affairs. He says the government claims to be spending a lot more money but the results aren't apparent. The explanation is a Dili-centric focus, and corruption.

"Before [in the first administration], the government didn't have much money. Now the government has a lot more money but the people don't see it," he says.

"Corruption in Timor-Leste is the biggest in the world. The [increased] money is in Dili; we don't get it in the districts."

To his credit, Gusmao is attempting to take seriously the fight against corruption. He has established a Commission Against Corruption, led by Aderito de Jesus Soares, a US- and Australian-educated lawyer who was a former member of parliament who broke away from the Alkatiri-dominated Fretilin party.

Oil also explains why East Timor's promising future risks being hijacked by the perils of plenty. All the hallmarks of failed states across the world are on show here. These include government spending focused on the urban capital, on the military and on edifices such as overblown public offices, and a profound disregard for the rule of law.

The author was a World Bank-appointed adviser to the first East Timor government. He is the author of Shakedown -- Australia's grab for Timor oil.

theaustralian.com.au/news/opinion/timors-poor-in-peril-amid-plenty/story-e6frg6zo-1225884253122 


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