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Jakarta Globe- June 15,2010
East Timor is one of the newest sovereign nations in the world, having officially become independent in 2002. The nation must find ways to spend its oil revenues that will improve the lives of the Timorese people.
It has a population of about a million people, but has official reserves of about $5.3 billion, making it one of largest holders of foreign reserves on a per capita basis. Most of the reserves are from offshore oil production carried out jointly with Australian companies. The country’s gross domestic product, about $700 million last year, is growing smartly at 7.2 percent, aided by oil and to a much lesser extent by the export of coffee.
But as proof, if any were needed, that the presence of oil and independence alone cannot solve all problems, East Timor also has an unemployment rate of about 20 percent and a literacy rate of about 40 percent.
The United Nations places it at 162 on its Human Development Index, the second-worst in all of Asia.
East Timor’s history accounts for its backwardness, as it was brutally colonized by the Portuguese for about 400 years and later occupied by the Indonesian military for another quarter of a century.
As is to be expected, more than 80 percent of the population are subsistence farmers and ill-suited to work in the only big industry going — oil.
Even some of the well-meaning financial rules put in place from 1998 to 2002, when the United Nations was in charge and preparing the country for full independence from Indonesia, are now turning into problems.
Afraid that the young nation might squander its newfound oil wealth, the royalties from oil production have been funneled into a petroleum fund that is being saved for the long term, and only 3 percent of it can be withdrawn for current expenditure.
It must have looked like a good idea at that time, but now we have a situation where the government, looking after a country in which 60 percent of the population is illiterate, is being prevented from splashing out in a big way on education and other social needs.
Instead, the petroleum royalties piling up in the fund are being “safely” invested in US Treasury bonds.
In a recent meeting in Dili, Prime Minister Xanana Gusmao told international donors that his people “do not need cash in American banks to help pay American deficits. President [Barack] Obama doesn’t need our $5 billion.”
Indonesian occupation might have been brutal, but Indonesia also invested heavily in education and other infrastructure.
Unfortunately, the Indonesian military destroyed most of what it created in 1998 and current expenditure is in some ways lower than the amount the Indonesians spent on human development.
No less a person than Jeffrey Sachs, the renowned US economist and special adviser to the UN secretary general, has urged the East Timorese government to rethink the way it uses its oil wealth.
Australia signed its petroleum production agreement about exploring for oil in the Timor Gap while East Timor was still under Indonesian rule, and Dili says the agreement is one-sided and does not provide what is due to East Timor under international law.
Dili has invited Malaysia’s Petronas and other oil companies to come and produce in the Timor Gap area, but Australia has objected strongly.
Regardless of the fairness of the matter, it seems unlikely that East Timor can strongly oppose Canberra’s wishes.
Australia is not only the nearest developed country, it sent in its own troops to restore order in May 2006 when sections of the East Timorese military attempted a coup d’etat.
Caught between its giant neighbors of Australia and Indonesia, and with a history of intervention for benign and not so benign reasons, East Timor, with its weak government institutions, has limited room for maneuver.
The world can only hope that this young country will find a way to spend its riches wisely and become richer in human terms.
N. Balakrishnan is a former writer for the Far Eastern Economic Review.
.
Jakarta Globe- June 15,2010
East Timor is one of the newest sovereign nations in the world, having officially become independent in 2002. The nation must find ways to spend its oil revenues that will improve the lives of the Timorese people.
It has a population of about a million people, but has official reserves of about $5.3 billion, making it one of largest holders of foreign reserves on a per capita basis. Most of the reserves are from offshore oil production carried out jointly with Australian companies. The country’s gross domestic product, about $700 million last year, is growing smartly at 7.2 percent, aided by oil and to a much lesser extent by the export of coffee.
But as proof, if any were needed, that the presence of oil and independence alone cannot solve all problems, East Timor also has an unemployment rate of about 20 percent and a literacy rate of about 40 percent.
The United Nations places it at 162 on its Human Development Index, the second-worst in all of Asia.
East Timor’s history accounts for its backwardness, as it was brutally colonized by the Portuguese for about 400 years and later occupied by the Indonesian military for another quarter of a century.
As is to be expected, more than 80 percent of the population are subsistence farmers and ill-suited to work in the only big industry going — oil.
Even some of the well-meaning financial rules put in place from 1998 to 2002, when the United Nations was in charge and preparing the country for full independence from Indonesia, are now turning into problems.
Afraid that the young nation might squander its newfound oil wealth, the royalties from oil production have been funneled into a petroleum fund that is being saved for the long term, and only 3 percent of it can be withdrawn for current expenditure.
It must have looked like a good idea at that time, but now we have a situation where the government, looking after a country in which 60 percent of the population is illiterate, is being prevented from splashing out in a big way on education and other social needs.
Instead, the petroleum royalties piling up in the fund are being “safely” invested in US Treasury bonds.
In a recent meeting in Dili, Prime Minister Xanana Gusmao told international donors that his people “do not need cash in American banks to help pay American deficits. President [Barack] Obama doesn’t need our $5 billion.”
Indonesian occupation might have been brutal, but Indonesia also invested heavily in education and other infrastructure.
Unfortunately, the Indonesian military destroyed most of what it created in 1998 and current expenditure is in some ways lower than the amount the Indonesians spent on human development.
No less a person than Jeffrey Sachs, the renowned US economist and special adviser to the UN secretary general, has urged the East Timorese government to rethink the way it uses its oil wealth.
Australia signed its petroleum production agreement about exploring for oil in the Timor Gap while East Timor was still under Indonesian rule, and Dili says the agreement is one-sided and does not provide what is due to East Timor under international law.
Dili has invited Malaysia’s Petronas and other oil companies to come and produce in the Timor Gap area, but Australia has objected strongly.
Regardless of the fairness of the matter, it seems unlikely that East Timor can strongly oppose Canberra’s wishes.
Australia is not only the nearest developed country, it sent in its own troops to restore order in May 2006 when sections of the East Timorese military attempted a coup d’etat.
Caught between its giant neighbors of Australia and Indonesia, and with a history of intervention for benign and not so benign reasons, East Timor, with its weak government institutions, has limited room for maneuver.
The world can only hope that this young country will find a way to spend its riches wisely and become richer in human terms.
N. Balakrishnan is a former writer for the Far Eastern Economic Review.
.
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