While East Timor will celebrate its first independence
day on May 20, 2002, the soon to be independent nation
is already plagued with problems. Centuries of Portuguese
colonial rule and 24 years of brutal, illegal Indonesian
military occupation have made East Timor one of the
poorest places on the planet. East Timor has a 60%
illiteracy rate, a per capita gross national product
of $340, and a life expectancy of only 48 years. The
infant mortality rate is 135 per 1000 live births,
and the maternal mortality rate is twice that of other
countries in Southeast Asia and the Western Pacific.
Xanana Gusmao, the President-elect of East Timor,
wants the country to develop a modern market economy
in which both the East Timorese private sector and
foreign investment will have roles to play. His hopes
are that East Timor will be able to take advantage
of the country's geographical location at the confluence
of commercial routes between Asia and Oceania. However
state intervention will take place whenever it will
be necessary to ensure equity, transparency and efficiency.
Rural development will be given priority with the
objective of developing existing products such as
rice, coffee, livestock and coconut. Steps will also
be taken to diversify the rural economy on which 80
per cent of the East Timorese population depends.
The need to utilise forest, fisheries and mineral
resources more efficiently has also been outlined.
The government also plans to create special economic
zones and develop the tourism industry.
All this however will require massive injection of
funds. But the country is short on funds and the World
Bank and multinational corporations are sinking their
claws into the economy.
As long as the highly paid UN staff were in the country,
they created a bubble by spending heavily and creating
demand for goods in the economy. Spending by the UN
and its staff accounted for 20 per cent of the GDP
of East Timor. But as they now leave the country,
East Timor will face a demand constraint with its
citizens not having the resources to keep the economy
moving. Most of the East Timorese are expected to
fall back on reliance upon subsistence agriculture.
In any case, most of the 740,000 East Timorese live
outside the cash economy, with only about 25,000 receiving
a regular wage, that too less than US$ 200 a year
on an average.
Coffee is the only cash crop of East Timor. And with
world coffee prices witnessing an overall decline
in recent years, expected revenues from coffee exports
are not going to provide the country with the necessary
The other revenue-generating possibility that East
Timor has is the vast oil and gas reserves in the
Timor Gap, an area lying in the Timor Sea between
east Timor and Australia, which are expected to generate
hundreds of millions of dollars in royalties over
the next 20 to 25 years. However, the Australian government
had been attempting to prevent East Timor from gaining
full sovereign rights over these reserves.
On December 11, 1989 foreign ministers of Indonesia
and Australia signed the Timor Gap Treaty, which allowed
the two governments to approve contracts to multinational
petrochemical companies eager to exploit the rich
reserves in the Timor Sea. Between 1989 and 1999,
gas and oil companies spent US$ 485 million to explore
and US$ 196 million to develop deposits in the area.
According to US-based Philips Petroleum, the biggest
private Timor Sea stakeholder, oil reserves of 30
million barrels and natural gas reserves of about
175 million barrels in the area are worth over $21
billion. The significant oil and gas reserves in the
Timor Gap were major factors behind Australia's support
for Indonesia's invasion and occupation of East Timor.
By arguing that the current terms of the Timor Gap
Treaty should remain unchanged, Australian Prime Minister
John Howard's government had been trying to swindle
the people of East Timor out of vital revenues, thus
undermining independent East Timor's ability to rebuild
its shattered infrastructure and economy.
Things improved to some extent in July last year.
On July 5, 2001 Australia signed a deal with East
Timor regarding the sharing of oil and gas revenues
between the two countries. Under the terms of the
landmark deal, East Timor will receive 90 per cent
of oil and gas revenue from a joint development area,
amounting to some A$ 7 billion over 20 years, starting
2004. Australia will also pay East Timor A$ 8 million
a year in unrestricted assistance in lieu of taxes
for a natural gas pipeline.
However, even then, the deal is going to benefit
Australia much more than it will benefit East Timor.
Under international law, East Timor is entitled to
a seabed boundary at the midpoint between East Timor
and Australia. This would give East Timor not 90 per
cent, but 100 per cent of the oil and gas in the Timor
Sea. Thus, while it may look like Australia is making
a major concession in moving from the 50/50 revenue
sharing it had under the Indonesia treaty to the 90/10
split in this new treaty, it is more than fair for
Australia will receive about A$ 1 billion in direct
revenue over that period. Further, Australia will
receive virtually all the downstream benefits from
the development of gas in the Timor Sea. The pipeline
will bring gas ashore in Darwin that will be used
in new infrastructure projects including multibillion-dollar
plants to convert the gas into liquid natural gas
(LNG) for export to the United States, and into methanol
for export to Asia. The Northern Territory Treasury
believes these gas-related developments will generate
A$ 50 billion in economic activity in the Territory
over the next 20 years. This is at least five times
the benefit that will come to East Timor.
The UN administration and Western donors have set
a budget of just US$ 65 million a year. With even
this aid being conditional on opting for a free market
economy, government services, including health and
education are bound to have severely constrained budgets.
The various capitalist powers - notably Australia,
Portugal and the US - are more keen to exploit East
Timor's natural resources than to provide aid for
improving the pitiable condition of the residents.
Indeed East Timor's independence can mean different
things to different people. One Australian businessman
thinks East Timor needs to be made a tax haven, it
should have a Swiss banking set-up, should have low
taxation and should greet foreign investors with open
arms. Tourism will be the biggest industry, if this
businessman has his way. In fact, many have visualised
East Timor becoming an upmarket Bali with five star
resorts in another 10 years.
While this is how some businessmen are looking at
East Timor, East Timorese are migrating to the capital,
Dili, and living in plastic shelters or roofless ruins
left by the Indonesian militia. The consumer price
index jumped up by 200 per cent between August and
October 1999. Diseases like malaria and dengue are
rampant, there are less than 40 doctors in the whole
country and none of them are specialists. And even
in this scenario, the World Bank representative has
launched into "educating" East Timorese
about how important it is to privatise health care
services. Quite aptly an American volunteer of the
East Timor Action Network had said, "Before it
can be privatised it has to exist".
The East Timorese
government faces an estimated shortfall of US$ 154-184
million in its already lean budget for the first three
years. The US pays more than this amount for an F-22
fighter plane. What East Timor needs are grants without
the crippling conditionalities of structural adjustment
attached. Sadly enough, at the UN International Conference
on Financing for Development in Monterrey in March
this year, the U.S. continued to insist on tying money
for poor countries to the stranglehold of structural
adjustment. Unless those mobilised for global justice
and debt cancellation rally in support of a debt-free,
structural adjustment-free East Timor, the people
of the world's newest country may be subjected to
a new form of economic colonialism. The country will
emerge as a chronically aid-dependent state where
rival members of the elite are at each other's throats,
corruption is endemic and the government cannot deliver
basic services. Under such circumstances, East Timor
will not be independent, but will just move from one
form of dependency to another.