Subject: BW: Was Timor's Chaos Part of a Plan to Create a Client State?
Date: Sat, 25 Sep 1999 12:18:13 -0400

Business Week: October 4, 1999 International Business: Indonesia

Was Timor's Chaos Part of a Plan? Jakarta may have set out to create a client state

By Michael Shari in Dili

The devastation was all but unthinkable only three weeks earlier, when East Timor voted for independence from Indonesia. But as U.N. peacekeepers landed in the tiny territory on Sept. 20, what they saw was all too real. In Dili, the capital city on Timor's north coast, shops, offices, schools, hotels, and homes were smoldering ruins. Marauding militias supported by the Indonesian army had sabotaged power plants, water works, and electricity and phone lines across the former Portuguese colony.

Thousands of Timorese jammed the city's squalid beachfront clutching all that remained from abruptly shattered lives--a chair, a cracked mirror, a towel. Only when troop ships anchored in the harbor did people begin walking back into the sacked city. Says Mattheus da Costa, a 28-year-old electrician whose home was looted: ``We feel safe now that the peacekeepers are here.''

It may be too soon for that. Several days after Australian-led troops arrived, much of Dili--and almost all of the countryside--was still unsecured. But even assuming that the militias are subdued, the international community now faces the enormous challenge of turning a ravaged, broken society--one that was never well developed to begin with--into a nation that can support itself. East Timorese are years away from regaining any sense of social and economic coherence. They now have neither government, civil service, nor infrastructure. They can no longer feed themselves, since the economy, rooted in agriculture, is a ruin.

The U.N., the World Bank, and other institutions are already planning East Timor's reconstruction as a sovereign state. The strategy is to create a modest but sustainable economy with small, well-targeted doses of aid. If all goes well, independent East Timor will learn to pay its way by exporting coffee, processing foods, and hosting tourists. What will soon be the world's newest nation should eventually see revenues from offshore oil and gas deposits.

But to the 850,000 East Timorese, these are only dreams. The chaos militias and the Indonesian army continue to inflict is no less than econocide. What appeared to be random violence after Timor's Aug. 30 vote now looks like part of a coldly calculated plan to depopulate much of the territory and reduce it to an economic basket case reliant on Indonesia. Almost certainly, Timor is also intended as a warning to Indonesian provinces rebelling against Jakarta.

COUNTING HOUSES. The army now appears intent upon claiming the coffee-growing hill country, East Timor's economic heartland, as part of Indonesia. As the first U.N. troops arrived, an anti-independence militia calling itself the National Unity Front asserted that it intended to retain control of eight of East Timor's 13 administrative districts. U.N. troops will move quickly to quell such resistance.

``Partition is out of the question,'' says a foreign official helping to plan East Timor's reconstruction. ``It's totally unacceptable to the international community.'' But diplomats in Jakarta say militias in neighboring West Timor could remain a destabilizing force for years to come.

The immediate task facing the U.N. and aid agencies is to rebuild houses, restart utilities, and restore social services such as hospitals and schools. ``It's not a question of counting the houses that have been burned down,'' says Jacqueline L. Pomeroy, a World Bank economist based in Jakarta. ``It's counting the houses left standing.'' In Darwin, Australia, economists and administrative experts are developing blueprints for a central bank, a currency system, and a civil service of 15,000. Once an assessment team sizes up the damage East Timor has suffered, it will report to the first meeting of aid donors. That is likely to take place in New York in October.

Portugal and Australia--the former colonial power and Timor's wealthiest neighbor--are likely to lead the donors' club. These two countries and various U.N. agencies are expected to pour $300 million into Timor this year--and $100 million annually for the next three years. These are significant sums. By comparison, Indonesia spent $50 million a year on development projects in East Timor; its operating budget--including salaries for a bloated bureaucracy of 28,000--was $64 million. ``There will be no shortage of money going into East Timor,'' says the World Bank's Pomeroy. ``The problem is capacity. In terms of resources, how much can this place absorb?''

Remaking East Timor is not, indeed, a short-haul project. Joao Mariano de Sousa Saldanha, a respected Timorese economist, thinks it could take 10 years to bring the new nation's per-capita income back to $200--its 1997 level and a fifth of Indonesia's average that year. While other economists say that's pessimistic, Saldanha--who is likely to play a prominent role in the first national administration--thinks it will also take a decade for Timor to finance its operating budget. ``Once we can cover the recurring bills, we'll be O.K.,'' he says. ``Then we go to the international community for help developing the economy.''

That economy is certain to rest on two hard-currency earners: coffee, a long-established plantation crop, and tourism. Although Timorese coffee gets mixed reviews for quality, it has a dedicated following. Last year the entire crop--worth $20 million to Timorese growers--went to Starbucks Corp., the U.S. coffeehouse chain. What was expected to be a $100 million bumper crop this year won't be harvested. As to tourism, it will take time to change East Timor's image from gunshots and burning houses to hot sand and fruity drinks. But it has a natural market: Darwin is 250 miles from Timor's pristine beaches.

OIL CLASH? Looming large among Timor's unknowns are offshore oil and gas fields co-managed by Indonesia and Australia. Most are not scheduled to produce commercially until 2003. While Timor is likely to inherit Indonesia's rights, the new government in Dili will probably clash with Jakarta over the pact that allows Australian companies to develop the fields. Says Saldanha: ``It's too early to talk about oil.''

Or timetables for much else. No one yet knows how long it will take even to stabilize East Timor--economically or militarily. Tensions in Jakarta also weigh heavily. Gen. Wiranto, the army's commander in chief, may face a showdown with legislators and students over a new security bill and plans to postpone a presidential election set for November. If a nationwide upheaval erupts, plans to rebuild East Timor would probably have to be reclassified--from difficult to all-but-impossible.

While Timor's tragic fate seems at least partly intended to keep rebellious provinces such as Aceh and Irian Jaya in line, it has backfired badly in Timor itself. After a baptism of blood and fire, the Timorese are more determined than ever to build their own nation. ``Now, it's murderers and burners vs. independence,'' says one foreign observer. And that's not much of a choice.

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