24 February 2015

PM Araujo, Recognize falling state revenues when revising the 2015 budget

On 24 February, La'o Hamutuk distributed a letter to Timor-Leste's leaders, which you can download as a PDF in English or Tetum.  A slightly edited version follows, with added text in brown.
24 February 2015
To:    His Excellency Dr. Rui Maria Araujo, Prime Minister of RDTL
Cc:    Minister of Finance Santina Cardoso, Minister of Planning and Strategic Investment Xanana Gusmão, Members of RDTL National Parliament, President Taur Matan Ruak, Media and public

Please review revenue projections and total expenditures as you revise the 2015 state budget.


Dear Excellencies,

Like everyone in Timor-Leste, we look forward to great things from the Sixth Constitutional Government that was sworn into office last week. The new Prime Minister faces tremendous challenges, and we hope that he and all of us will be able to move this beloved country in a more sustainable, equitable and democratic direction. We are ready and willing to help in this process.

One of the consequences of restructuring the Government is that the 2015 General State Budget, promulgated less than two months ago, needs to be revised. Certainly, the Rectification Budget will have to shift money from agencies which no longer exist and add lines for new institutions. However, we hope that Government and Parliament will conduct a broader review and make more fundamental changes. As this letter explains, we believe the that revised 2015 State Budget should be based on an Estimated Sustainable Income (ESI) from the Petroleum Fund of $450 million,  with total expenditures of $1,135 million or less.

Oil prices and revenues have dropped markedly since the budget was prepared.

When the 2015 budget was proposed to Parliament last October, its petroleum revenue projections were based on price estimates which the U.S. Energy Information Administration had published in April 2014.  At that time, the world market price of a barrel of Brent crude oil was $108. As we all know, prices unexpectedly fell sharply starting in July; the Brent price during January 2015 averaged $48/barrel. It would be foolhardy to continue to budget based on information which is clearly no longer correct.

According to Book 1 of the 2015 RDTL General State Budget, the Petroleum Revenue forecasts were based on a benchmark price of $108/barrel for 2014, dropping to $90 in 2015 and $87 in 2016. At that time, these lower projections appeared prudent, but subsequent events have shown them to be too optimistic. The average Brent price during all of 2014 turned out to be $99. According to the EIA’s most recent published projections, Brent prices in 2015 are expected to average $58, rising to $75 in 2016.  However, the EIA pointed out that there is “very high uncertainty in the price outlook.” The Petroleum Fund Law requires prudence, and the ESI calculation should use lower prices than the EIA Reference Case. Although there are no official projections for the longer term, we suggest that estimating $40/barrel or lower for 2015 and $45/barrel for subsequent years would be reasonable.

The Estimated Sustainable Income is the amount which could theoretically be withdrawn from the Petroleum Fund every year, forever, to be replaced by future petroleum revenues and investment returns. Under Timor-Leste’s Petroleum Fund Law, ESI is 3% of the total of the current balance in the Fund and the expected revenues from oil and gas fields with approved development plans, corrected for Net Present Value. Bayu-Undan and Kitan are the only such fields at present.

According to the Ministry of Finance’s Sensitivity Analysis,  if the Brent price drops by $10/barrel, Timor-Leste’s Estimated Sustainable Income will drop by $25 million. Using our suggested updated price estimates would reduce the ESI by about $125 million.

After this letter was delivered, we realized that extrapolating the $25m/$10 marginal sensitivity to a much larger oil price drop over-estimates the impact of the price drop. The reduction in ESI is probably closer to $80 million, which would result in a revised ESI of $495 million, and the rest of this article uses this figure.

Although oil prices fell during the second half of 2014, Timor-Leste’s oil revenues during 2014 totaled $1,816 million, slightly higher than the $1,705 million that had been prudently projected when the budget books were written. This would increase ESI by $3 million.

On the other hand, ESI should be reduced by $3m because the Government transferred $100m more from the Petroleum Fund in 2014 than the ESI calculation in the 2015 budget expected.

The rising U.S. dollar and falling oil price have additional effects.

The fall in the global petroleum price, which has been accompanied by a significant rise in the U.S. dollar relative to currencies in countries Timor-Leste imports from and invests in, has other results which lead us to reduce the state budget:
  • The rising dollar also means that the Petroleum Fund’s investments in non-USD-denominated securities have lost value, as the value of the Fund is calculated in U.S dollars. The Central Bank of Timor-Leste reports that the balance in the Fund dropped by $426 million in 2014 due to these foreign exchange losses, reducing the return on investment earned by the Fund last year by about one-third.  As a result, the Fund earned a nominal return of 3.3% during 2014. After correction for U.S. inflation rates, this is a real return of about 2.5% – less than the ESI formula is based on. This amount of foreign exchange losses would reduce ESI by $13 million.
  • If the oil price remains low, the amount of oil and gas which can be profitably extracted from Timor-Leste’s known reserves will be less. The companies will not find it commercially justifiable to suck up the last drops (which will shorten Bayu-Undan’s life and reduce its total production), and it will be impossible for Timor-Leste to find another company to continue operating the field after ConocoPhillips stops.  Even before the recent oil price drop, the 2014 and 2015 state budgets each projected less production from Bayu-Undan than had been projected in the previous budget, and independent auditors hired by Timor-Leste confirmed ConocoPhillips’ reduced estimates of the recoverable reserve.
  • Oil companies around the world are cutting back investment to explore and develop new fields. On 18 February, Woodside announced that it was suspending work on Greater Sunrise. While this could be a tactic to pressure Timor-Leste to concede on maritime boundaries and floating LNG, it also reflects an industry-wide pattern, responding to reduced income and uncertain future revenues. This will make it even harder to find new commercially-valuable oil or gas deposits in Timor-Leste’s territory, and could further delay the long-promised bidding round for new Production Sharing Contracts.
However, the rising dollar and falling oil prices also brings some benefits to Timor-Leste, enabling us to save about $110 million when buying goods and services this year:
  • The approved State Budget for 2015 includes $115 million for vehicle and generator fuel. Since the wholesale price of diesel has dropped by nearly half since the budget was prepared, this fuel will cost about $58 million less than was anticipated. The savings can be cut from the budget with no effect on state activities.
  • Approximately 39% of Timor-Leste’s state expenditures purchase goods imported from countries which do not use the U.S. dollar, and another 14% is for imported services. This adds up to about $497 million in non-fuel goods and $22 million in services. The USD-Rupiah exchange rate increased by 10% during the last 12 months, and there have been similar changes in the USD value relative to other countries we import from. Therefore, it will cost about USD $52 million less to purchase the same work and materials than it would have last year.

A smaller, better government should be less expensive.

The Sixth Constitutional Government reduced the number of office-holders from 54 to 38. Although this does not mean that the entire Government is now 27% smaller (if it were, this would reduce the budget by $420 million), it will save some money, as a few ministries have been combined and certain offices eliminated.

During his first speech as Prime Minister, Dr. Rui Maria Araujo said that the new Government would be more “efficient, effective and accountable.” He promised that “We cannot continue allowing waste and the ineffective use of public monies” and stressed how important quality services, discipline, sustainability and integrity will be in the Sixth Constitutional Government.

Reducing waste and corruption, making the bureaucracy more efficient and requiring more productivity from public servants will enable the entire state apparatus to get more value for money, which is another reason to reduce the total budget. If appropriations are not reduced to prudent and realistic levels, the desire for good budget execution scores will encourage wasteful spending, as it has in the past.

We also encourage the new Government to take a new look at megaprojects which will cost a few million dollars in 2015 but could cost many billions in future years. Parliament and the public have yet to be told how much Timor-Leste will have to invest to build the components of the Tasi Mane project, the Oecusse Special Economic Zone, Tibar Port, Dili airport and other major public expenditures. We suggest that a thorough review be conducted of these projects, including their full life-cycle costs, benefits and economic viability. Timor-Leste should not commit its people’s money through contracts, loans, or PPP agreements which could obligate the Seventh, Eighth, Ninth and Tenth Constitutional Governments to spend money that we don’t have. La’o Hamutuk has suggested this to Parliament for several years, but perhaps the existence of a new Ministry with responsibility for Planning and Strategic Investment will provide the authority and expertise to carry out such studies. As the new Prime Minister said, “we must invest in a responsible and sustainable manner.”

During 2013 and 2014, Government transfers from the Petroleum Fund were below the limits set by the Budget Laws. La’o Hamutuk agrees with this, as it is unnecessary (and illegal) to transfer more money from the Petroleum Fund than is required for a given year’s expenditures. This was possible because in 2010-2012 the Government transferred much more from the Petroleum Fund than it was able to spend, accumulating an unreasonably large cash balance of $819 million in the Treasury by the end of 2012, which was spent down to $181 million at the end of 2014. Therefore, this cushion no longer exists. If budget execution rates stay as high as last year’s 93%, new transfers from Petroleum Fund will have to pay for the great majority of state spending in 2015. Timor-Leste transferred $70 million from the Fund already in January 2015 – the first time money has ever been taken out of the Petroleum Fund during the first two months of a fiscal year. 

Conclusion and recommendation

The changes to the Estimated Sustainable Income discussed above can be summarized as
    $638 million   Estimated in the current 2015 General State Budget
-     $80 million    Directly from lower oil prices in the future
-      $ 3 million    Overspending the 2014 ESI by $100 million
+      $ 3 million    Oil revenues in 2014 $111 million higher than prudent projections
-      $13 million    $426 million in foreign exchange losses during 2014 from Petroleum Fund investments
-      $50 million    Lower future production due to commercial considerations
    $495 million   Revised ESI based on the above discussion.

Therefore, the rectified 2015 General State Budget should be based on an ESI of $495 million. The original $1,570 million GSB for 2015 would require $1,327 million from the Petroleum Fund, which is $832 million above the revised ESI, more than double the sustainable level and nearly the highest excess transfer in Timor-Leste’s history.

A sustainable budget would transfer only the ESI from the Petroleum Fund, which would be added to $170 million in domestic revenues and $65 million in loans received. (Although we feel that borrowing is unsustainable and unadvisable, for this discussion we accept additional borrowing for loan-financed projects which have already started.)  This gives a total fiscal envelope of $730 million – less than half of the enacted 2015 budget.

However, the drop in oil prices and rise in the U.S. dollar also allows some budget changes with no impact on state activities:
$1,570 million   Total expenditures in current 2015 General State Budget
-     $52 million    Lower prices on goods and services imported from non-USD countries
-     $58 million    Lower prices for generator and vehicle fuel
$1,460 million   Revised state budget with no change in activities.

It would be traumatic to cut the budget to $730 million this rapidly, so we suggest a less sustainable but more feasible middle ground. On 17 June 2014, the Council of Ministers approved a fiscal envelope of $1,300 million for the 2015 State Budget. Based on the discussion above, the identical amount of goods and services can be purchased today for around $110 million less, and eliminating some agencies and reducing waste should reduce the 2015 budget by at least $55 million more, so a recalculated “Yellow Road” fiscal envelope for 2015 would be under $1,135 million. This still requires transferring $900 million from the Petroleum Fund, which is $405 million over ESI. This overspending will lower ESI by $12 million every year in the future. We hope that future state budgets will be more sustainable.

Certain sectors have been consistently underfunded in recent state budgets and do not adequately serve Timor-Leste’s young, impoverished and rural population. Therefore, we urge that appropriations for education, health, agriculture and rural infrastructure be maintained, even when the overall budget is reduced. Funding for these sectors is already too low, and we hope that improvements in efficiency and integrity will enable more value for the allocated money.

In closing, we appreciate that Dr. Rui Maria Araujo pointed out that “The establishment of the Petroleum Fund by the First Government enabled responsible and transparent resource management, for the benefit of current and future generations. It currently holds over $16 billion, which must be protected and invested sustainably.” We hope that the entire Government and Parliament listens to these wise words, and that the revised 2015 State Budget is more consistent with economic realities and sustainable goals than recent ones have been. As always, La’o Hamutuk would like to help.

Thank you very much for your attention.
Juvinal Dias, Adilson da Costa Junior, Charles Scheiner, Pelagio Doutel, Niall Almond
La’o Hamutuk Economics and Natural Resources Team

18 February 2015

Transparency Initiative gets a little more opaque

Earlier this month, Timor-Leste published its Extractive Industries Transparency Initiative (EITI) Report for 2012. The report was celebrated by the international EITI Secretariat and the government of Timor-Leste as an advance in public information about oil and gas revenues "including more comprehensive information than ever before." Unfortunately, it is actually a step backwards from the amount of transparency in the 2010 and 2011 reports. Although it has more already-public general information on oil and gas projects in Timor-Leste, it has much less on the specific payments by the companies to Timor-Leste's government, which is the principal purpose of EITI.

The previous two reports contained more detailed data than the companies wanted, and they were outvoted when the Multi-Stakeholder (companies, government and civil society) Working Group decided to publish them. When the framework for the 2012 report was being discussed, civil society urged that it again be disaggregated by product and revenue stream -- but unfortunately the companies prevailed this time.  At the report's gala launch in Hotel Timor on 6 February, ConocoPhillips representative Jose Lobato was delighted that it responded to company wishes, unlike previous reports. Global EITI Chair Clare Short spoke about how important EITI is in other countries, and how Timor-Leste has been a leader for them.

Timor-Leste published its EITI report for 2012 five weeks late, according to EITI rules. The latest report contains significantly less information than the 2010 and 2011 reports, with FTP (royalty) combined for all products (gas, condensate and LPG), and each company subsidiary's payments given as one lump sum. In most cases, it contains less revenue data than Timorese agencies had published more than a year ago.

The 2012 report laments that recommendations in previous reports have not been implemented, including creating a database of companies and conducting a scoping study prior to reconciliation. It makes new recommendations to create a legal framework for EITI in Timor-Leste, add detail to the reporting template, start working on the report earlier, and clarify confidentiality agreements demanded by the companies. Although these recommendations would improve technical implementation, they do not protect transparency.

The report confirms that oil companies paid $266 million to Timor-Leste in 2012 for taxes due in prior years and associated penalties. These are being appealed, and Timor-Leste may have to return this money (and perhaps more) if the companies continue to prevail.

The two graphs which follow are based on information published by the National Petroleum Authority, Central Bank and Ministry of Finance. That data is not in the latest EITI report, which only covers 2012 and has no monthly data, revenue source breakdown or production information. We appreciate that Timorese agencies remain more transparent than EITI on oil and gas receipts.

Timor-Leste's petroleum revenues peaked in 2011 and 2012. They dropped 15% in 2013 and 42% further in 2014. Although some of the 2014 decline was due to world market prices, a more important factor was the 24% drop in production because the fields are being exhausted. Bayu-Undan and Kitan have less than five years of production remaining.

Timor-Leste has saved more than $16 billion of its oil and gas revenues in its Petroleum Fund, but, for the first time in the country's history, the balance in that Fund fell during the last half of 2014. Celebrating two-year-old EITI data ignores this disturbing reality. 

During the past year, Timor-Leste's government has reduced publicly available information regarding procurement, macroeconomics, poverty and other areas. We hope that the new Prime Minister and Minister of Finance will reverse this trend, but it will be a struggle. La'o Hamutuk recently published an article with some lessons based on TL's experience.

The international EITI article expects that the 2012 EITI report "will catalyse fresh investment for exploration and production in [an] upcoming bidding round" for offshore oil and gas exploration blocks. However, Timor-Leste officials have promised a bidding round for "the coming year" since at least 2010; the last one was in 2006. Although it is possible that Timor-Leste's constrained land and sea territory contain significant undiscovered reserves, it is unlikely. Clearly, it would be foolhardy to base hopes for future development in this extremely petroleum-export-dependent country on the faint chance that large deposits were missed during decades of seismic exploration and dozens of dry test wells already drilled. Today's news that Woodside is suspending work on Greater Sunrise should be a signal to everyone.

Inisiativa transparénsia ne’ebé sai nakukun uitoan

Iha inísiu fulan ida-ne’e, Timor-Leste publika relatóriu Inisiativa Transparénsia ba Indústria Ekstrativas (EITI/ITIE) ba tinan 2012 nianSekretariadu Internasional ITIE no governu Timor-Leste selebra relatóriu ida-ne’e hanesan avansa boot iha informasaun públiku kona-ba reseitas husi mina no gas. Sira temi katak relatóriu ida-ne’e “inklui informasaun ne’ebé kompletu liu, kompara ho hirak ne’ebé halo tiha ona iha pasadu”.  Maibé iha realidade, relatóriu ne’e hatudu katak Timor-Leste marka pasu ida ba fali kotuk, haree husi valor transparénsia husi relatóriu tinan 2010 no 2011 nian. Maski relatóriu ne’e hato’o informasaun jerál kona-ba projetu sira mina no gas nian iha Timor-Leste ne’ebé fó sai ba públiku tiha ona, informasaun espesífiku kona-ba pagamentu husi kompañia sira ba governu Timor-Leste, ne’ebé sai nu’udar objetivu prinsipál husi ITIE nian, uitoan liu.

Relatóriu rua molok ne’e fahe dadus ne’ebé detallu liu maski kompañia sira lakohi ida-ne’e. Iha enkontru Grupu Trabalhu (Multi-Stakeholder Working Group) nian (kompostu husi kompañia sira, governu no sosiedade sivíl) iha tempu ne’ebá, kompañia sira lakon iha votus atu deside publika detallu sira ne’e. Iha diskusaun ba kuadru relatóriu 2012 nian, sosiedade sivíl ezije atu dala ida tan halo separasaun bazeia ba produtu no tipu reseitas iha relatóriu ida-ne’e -- maibé kompañia sira mak manán iha diskusaun ne’e. Iha eventu lansamentu relatóriu ida-ne’e, ne’ebé halo iha Hotel Timor iha loron 6 fulan Fevereiru, reprezentante ConocoPhillips nian, José Lobato, hateten nia kontente tanba relatóriu ida-ne’e tuir duni buat ne’ebé mak kompañia hakarak, la hanesan ho relatóriu sira seluk ne’ebé halo ona. Prezidente ITIE Global nian, Clare Short, ko’alia kona-ba importánsia husi ITIE ba nasaun sira seluk, no Timor-Leste durante ne’e sai ona hanesan lider ba nasaun sira ne’e.

Publikasaun relatóriu ITIE tinan 2012 nian ne’e, se tuir duni regulamentus ITIE nian karik, relatóriu ne’e tarde semana lima ona. No relatóriu ida-ne’e inklui informasaun ne’ebé menus liu kompara ho relatóriu husi 2010 no 2011. Iha relatóriu ida-ne’e, FTP (royalty) ne’ebé kompostu husi produtu hotu (hanesan gas, mina kondensadu no LPG), kompañia subsidiariu ida-idak relata ho montante ida de’it. Wainhira halo hanesan ne’e, dala barak fó dadus reseitas nian ne’ebé uitoan liu kompara ho saida ma, órgaun Timor-Leste nian publika ona tinan kotuk.

Relatóriu 2012 nian ne’e triste kona-ba rekomendasaun sira ne’ebé halo ona husi relatóriu sira iha pasadu, tanba seidauk implementa. Rekomendasaun sira ne’e mak hanesan atu kria báze-de-dadus ida kona-ba kompañia sira no halo estudu ida molok halo rekonsiliasaun. Relatóriu ITIE 2012 nian fó rekomendasaun foun hanesan; atu kria kuadru legal ida ba ITIE iha Timor-Leste, atu aumenta detallu iha formuláriu ne’ebé kompañia sira tenke prenxe, atu komesa prepara relatóriu ne’e sedu liu, no atu klarifika akordu konfidensialidade nu’udar kompañia sira husu. Maski rekomendasaun sira ne’e karik bele hadi’ak implementasaun iha parte téknika, maibé sira ne’e la fó protesaun ba transparénsia.

Iha relatóriu ida-ne’e konfirma katak kompañia mina sira selu tokon $266 ba Timor-Leste iha tinan 2012 atu kobre taxa sira husi tinan sira ne’ebé liu ba no multa sira ne’ebé kompañia sira tenki selu. Hirak ne’e, oras ne’e daudaun kompañia lori kazu balun ba aprezenta hela iha tribunal arbitrajen iha Singapura, no Timor-Leste karik tenke fó fila fali osan ida-ne’e (no bele liu tan) se kompañia sira kontinua atu manán.

Gráfiku rua tuir mai ne’e bazeia ba informasaun ne’ebé publika husi Autoridade Nasionál Petróleu, Banku Sentrál no Ministériu Finansas. Dadus ida-ne’e la inklui iha relatóriu ikus husi ITIE nian, ne’ebé kobre de’it ba tinan 2012 no la inklui dadus mensal, ka detalhu husi fontes reseitas, ka informasaun kona-ba produsaun. Ami apresia katak ajénsia Timor-Leste nian ne’e transparente liu kona-ba reseitas mina no gas, kompara ho ITIE.

Reseitas petrolíferu to’o ninia másimu iha 2011 no 2012. Iha tinan 2013 tun 15%, no iha 2014 tun 42% tan. Maski iha 2014 fatór ida ne’ebé afeta hodi halo reseitas tun ne’e mak hanesan folin mina mundiál ne’ebé tun, fatór seluk ne’ebé importante liu mak produsaun ne’ebé monu 24% tanba kampu mina sira komesa atu maran ona. Bayu-Undan ho Kitan iha rezerva ne’ebé ninia produsaun sei dura la to’o tan ba tinan lima.

Timor-Leste rai ona liu billaun $16 husi reseitas mina no gas ninian iha Fundu Petrolíferu, maibé, ba dala uluk iha istória nasaun ida-ne’e nian, balansu Fundu ne’e monu iha trimestre rua ikus iha tinan 2014. Wainhira selebra dadus ITIE nian ne’ebé tinan rua tarde ona ne’e ignora tiha realidade ne’e, ne’ebé tuir loloos tenke sai preokupasaun boot.

Iha tinan kotuk, governu Timor-Leste hamenus informasaun sira ne’ebé públiku bele asesu inklui informasaun kona-ba aprovizionamentu, makroekonómiku, pobreza no asuntu seluk tan. Ami hein katak Primeiru Ministru no Ministra Finansas foun bele halo mudansa ba tendénsia ida-ne’e, maibé ne’e karik sei susar uitoan. La’o Hamutuk foin lalais ne’e publika artigu ida kona-ba lisaun balun husi Timor-Leste nia esperiénsia.

Artigu husi ITIE internasionál ne’e espera katak relatóriu ITIE 2012 “sei aselera investimentu fresku ba esplorasaun iha prosesu tenderizasaun nian ne’ebé sei halo iha tempu badak” ba rikusoin potensiál mina no gas iha tasi laran. Ofisiál sira Timor-Leste nian promote ona prosesu tenderizasaun sei halo “iha tinan oin” maibé promesa ida-ne’e halo hahú kedas iha tinan 2010 to’o agora; tenderizasaun ikus liu mak iha tinan 2006. Maski karik iha posibilidade katak Timor-Leste iha rezerva komersiál iha territóriu rai maran no tasi laran ne’ebé seidauk deskobre, maibé ne’e improvavel. Klaru katak ladún matenek atu bazeia planu ba dezenvolvimentu sira iha futuru nian iha nasaun ida-ne’e - ne’ebé iha dependensia boot liu ba esportasaun petróleu, ba rezerva mina-rai. Iha posibilidade ne’ebé ki’ik teb-tebes katak rezerva boot sira ne’e seidauk hetan wainhira ita halo ona peskiza durante tinan barak no posu atestadu lubuk ida ne’ebé halo ona la hetan rikusoin ho montante komersiál. Notisia semana ida ne’e katak Woodside suspende servisu iha Greater Sunrise tenke sai nu’udar sinál ida ba ema hotu.

05 February 2015

Ita presiza buat barak liu duke osan atu atinji dezenvolvimentu:

Lisaun husi no ba Timor-Leste
Iha fulan Outubru tinan kotuk, ONU nia Konsellu Ekonómiku no Sosiál ba Ázia Pasífiku (ESCAP) hala’o sorumutu rejional ida kona-ba Finansiamentu Lakunas Graduasaun husi Nasaun Menus Dezenvolvidu (Least Developed Country Status) sira iha Ázia-Pasífiku iha Bangladesh. Iha enkontru ne’e, ha’u lori diskusaun kona-ba dalan sira oinsá atu promove dezenvolvimentu bazeia ba esperiénsia Timor-Leste nian.

ONU kalkula Nasaun Menus Dezenvolvidu sira nia kondisaun liu husi kombinasaun estatístika: Rendimentu Nasional Brutu/Gross National Income per kapita, Index Riku-soin Umanu/Human Assets Index (HAI: malnutrisaun, mortalidade infantíl, alfabetizasaun, rejistu eskolár) no Index Vulnerabilidade Ekonomiku/Economic Vulnerability Index (EVI: medida, izolasaun, diversidade ekonómiku, estabilidade agrikultural, dezastre naturais, dependensia ba importasaun). Kompara ho Nasaun Menus Dezenvolvidu sira iha rejiaun, Timor-Leste marka númeru ne’ebé aas iha GNI (tanba reseita husi mina no gas), maibé Human Assets Index mak iha lista aat liu, segundu (Afganistan mak primeiru) no ami nia EVI mak kuaze iha mediu de’it, dook liu husi rekerimentu sira graduasaun ninian. Maski nune’e, nasaun menus dezenvolvidu sira iha Ázia-Pasífiku barak mak iha patrimóniu umanu (human asset) ne’ebé forsa liu no menus iha vulnerabilidade ekonomia maski sira nia governu iha osan menus liu.

ONU permite nasaun sira atu hi’it an (“gradua”) sai husi estadu Nasaun Menus Dezenvolvidu bainhira sira iha rendimentu ne’ebé aas tebes, maski sira nia EVI no HAI sei menus loos, hanesan dalan ne’ebé Giné Ekuatorial foti. Padraun ida ne’e reprezenta fallansu atu utiliza rekursu finansiál ba benefísiu públiku. Faktu katak Timor-Leste sei posivel atu gradua husi estadu Nasaun Menus Dezenvolvidu iha tinan hirak tuir mai bazeia ba rendimentu de’it, maski sei falla iha indikadores rua seluk.

Konferénsia ESCAP inklui ema na’in 75 ne’ebé mai husi Nasaun Menus Dezenvolvidu sira iha rejiaun laran – Afganistan, Bangladesh, Bhutan, Cambodia, Kiribati, Repúblika Demokrátika Popular Lao, Nepal, Ilhas Salomaun, Timor-Leste no Tuvalu. Organizadór sira konvida Charles Scheiner atu diskute kona-ba aspektu non-finanseiru atu nune’e nasaun Menus Dezenvolvidu sira sai husi estadu ida ne’e: Saida mak bele aprende husi Timor-Leste nia difikuldade atu hadi’a ninia HAI no EVI, maski iha rendimentu ne’ebé boot husi mina? Tuir mai mak ninia aprezentasaun ne’ebé atualizadu (mos PDF), tradus husi Ingles ba Tetum. Maski ida ne’e prepara ba ema husi nasaun seluk, aprezentasaun ida ne’e mós sei iha valor ba sira tomak ne’ebé sei lori responsabilidade foun iha Governu Timor-Leste ne’ebe foin restrutura.


Faktu Báziku Balun kona-ba Timor-Leste

  • Timor-Leste restaura ninia independénsia iha 2002, hafoin funu no sékulu barak iha nasaun seluk nia ukun.
  • Tersu-kuartu (3/4) husi ninia ekonomia no 93% nia reseita estadu mai husi rendimentu mina-rai no gas.
  • Ninia GDP non-petrolíferu aumenta lalais hahú husi 2008 to’o 2012.
  • Estadu ne’e rai ona hamutuk billaun $16 iha Fundu Riku-soin Soberanu (hanaran Fundu Petroliferu).
  • Kampu mina-rai sira bele maran iha tinan neen, no Fundu Petroliferu tinan neen hafoin ida ne’e.
  • Ninia populasaun tokon 1.2 sei nafatin entre sira ne’ebé kiak liu iha rejiaun laran, no populasaun maioria mak ho otas ki’ik liu tinan 17.
  • Maioria populasaun Timor-Leste nian sei moris iha pobreza, no pursentu ida ne’e kontinua aumenta.
  • Dois-tersu husi populasaun mak hela iha area rural, maioria sustenta husi agrikultura subsistensia.
  • Falta saneamentu no malnutrisaun ne’ebé endemika.
  • Kuaze labarik 1,200 ho idade tinan 5 mai kraik mak mate tinan-tinan hosi kondisaun sira ne’ebé bele prevene … barak liu dala ruanulu (20) kompara ho ema husi otas hotu hotu ne’ebé mate husi violénsia fíziku. 

Dependensia ba Petroliferu

  • GDP Petrolíferu iha 2012                                     tokon $4,309 (78%)
    GDP non-petrolíferu                                              tokon $1,246 (22%)
        Setór produtivu (agrikultura no indústria)    tokon $   247 (4%)
  • Projesaun ba reseita  iha 2015                          tokon $2,530
    tokon $2,290 (91%) husi mina-rai sei mai husi mina (inklui tokon $916 husi retornu investimentu)
    tokon $   170 ( 7%) husi fontes non petrolíferu
    tokon $     70 ( 3%) sei empresta husi fonte internasionál sira
  • Orsamentu estadu 2015                       tokon $1,570
    tokon $1,328 (85%) sei mai husi Fundu Petroliferu iha 2015.
    tokon $     72 ( 4%) tan mai husi Fundu Petroliferu iha pasadu no futuru.
  • “Rendimentu” petrolíferu ba governu, la’ós ba ema.
  • Atividade estadu nian, selu ho osan husi mina nian, metade ida kompostu husi ekonomia “non-petrolíferu”, tanba osan balun sei sírkula iha ekonomia lokal.
  • Balansu komérsiu ba sasán iha 2014: tokon $526 husi importasaun, tokon $14 non-petrolíferu esportasaun (95% kafé)

Reseita husi mina atinje másimu iha 2012, tun 15% iha 2013 no kontinua tun ba 42% tan iha 2014. Súl Sudaun, Líbia (no Giné Ekuatoriál?) de’it mak dependente liu ba esportasaun mina no gas kompara ho Timor-Leste.

Lisaun ne’ebé bele aprende husi esperiénsia Timor-Leste nian

Lisaun 1: Sustentabilidade mak direitu jerasaun futuru sira nian.

  • Dezenvolvimentu ne’e prosesu ida ne’ebe kontinua la’o, la’ós projetu ida ne’ebé iha rohan.
  • Rekursu naun renovavel ka rekursu sira ne’ebé eksplora barak liu ona, hakarak ka lakohi, sei hotu, no tenke troka ho buat seluk.
  • Ida ne’e presiza hanoin no planu ba termu ne’ebé naruk liu duke konsultan ida nia kontratu, oráriu projetu ida ka sikulu eleitorál nian.
  • Poupa reseita petróleu nian bele tulun, maibé reseita ne’e karik sei la to’o ba jerasaun tuir mai.
  • Investimentu ho despeza ne’e la hanesan – ne’e duni tenke prodús retornu ekonómiku ka sosiál ne’ebé konkretu iha futuru.
  • Tenke halo manutensaun ba infraestrutura hafoin harii tiha, no sikulu moris husi kustu manutensaun, operasaun no selu deve sira tenke analiza ho didi’ak, no inklui iha orsamentu molok aprova projetu ida. Manutensaun ida ne’ebé pontual ne’e baratu liu fali duke rekonstrusaun bei-beik.
  • Empréstimu, mezmu husi deve ka sikat iha Parseria Públiku-Privadu sira, bele hafraku sustentabilidade bainhira kustu ne’ebé sei selu fali aas liu fali retornu ka ninia durasaun atu selu fila fali ne’e naruk liu fali rendimentu sira husi projetu ne’ebé iha.  

Lisaun 2: Planu mak esensiál liu.

  • Planu tenke longu prazu, ne’e inklui ba dezenvolvimentu en jerál no mós projetu ida-idak. Ne’e tenke bazeia ba konsiderasaun no viabilidade tékniku, sosiál no finanseiru, la’ós bazeia ba ajenda polítika ka sujestaun sira husi doador sira.
  • Projetu infraestrutura tenke fó benefísiu ne’ebé konkretu ba ema. Sira tenke ajusta dimensaun atu responde nesesidade sira ne’ebé projectadu ho razoavel iha futuru.
  • Tanba de’it dehan buat ida ne’e bele realiza la signifika katak ne’e mak di’ak liu ona ka loos liu ona atu hala’o.
  • Sai kreativu no fleksivel- karik iha proposta ruma mak sala hela, troka tiha.
  • Labele husik setór ida ka proponent ida mesak atu muda tiha prosesu foti desizaun no prioridade sira – Karik ita iha martelu ida, buat hotu ita haree hanesan pregu.
  • Uza teknolojia sékulu 21 nian – desentralizadu, renovavel no sustentavel. Aprende husi esperiénsia husi rai seluk, no labele repete sira nia istória ka sala sira.
  • Bainhira planu sira no promesa sira mak labele realiza, ema sei sente traidu no la satisfás.
Planu tenke bazeia ba dadus.
  • Informasaun ne’ebé loos no aktual mak esensiál tebes – maski kona-ba topiku sira ne’ebé la konfortavel ba ita, hanesan pobreza ka frakeza polítika sira.
  • Labele fiar ita nia publisidade rasik – desizaun sira tenke bazeia ba faktu, la’ós husi reklamasaun ka mehi sira.
  • Wainhira dadus kona-ba tinan sira pasadu nian mak laloos, ne’e iha posibilidade katak dezenvolvimentu aktual ka tendénsia ne’ebé iha ne’e superfisiál de’it.
  • Dadus tenke signifikativu: naran husi lista inskrisaun iha eskola ne’e diferente husi saida mak labarik sira aprende los.
  • Nasaun ida kompostu husi ema, la’ós osan, no nune’e mós ekonomia. Sukat GNI no GDP hatudu oinsá ema riku uitoan sira nia moris, no la refleta moris ema kiak sira ne’ebé maioria liu.

Lisaun 3: Rekoñese Kontekstu.

  • Heransa husi konflitu no opresaun iha pasadu, inklui autokrasia, trauma, impunidade no falta esperiénsia, tenke diskute. Sira sei la lakon rasik de’it.
  • Sidadaun no lideransa sira iha nasaun foun ida mak la fiar iha “Estadu de Direitu,” sei sempre proteje kbiit laek husi podér arbitráriu, inklui husi estadu. Buat ne’ebé sira presiza liu mak ezemplu, la’ós manda saida mak sira tenke halo.
  • Progresu inisial husi báze liu (“ground zero”) ne’e ladún difisil, maibé la sees dook liu hodi ba atinje ema nia direitu sira.
  • Sidadaun sira sai forte liu durante tempu difisil; konsidera sira nudár ita nia rekursu ne’ebé boot liu hotu.

Lisaun 4: Atinje soberania no diversifikasaun.

  • Ekonomia ida labele hamriik ho ain sorin de’it. Petróleu sei labele troka ho setór ida mesak de’it, maibé setór barak. Eko-turizmu, indústria ki’ik, agrikultura no prosesu ai-han bele kria kampu servisu, rendimentu no nesesidade báziku.
  • Ema tenke han uluk lai molok sira bele gasta, no agrikultura tenke prioritiza nutrisaun lokál duke hahán esportasaun sira. Soberania ai-han no ekonómiku ne’e nia importánsia hanesan mós ho soberania polítika.
  • Produsaun lokál tenke substitui ba importasaun, ne’ebé fó vantajen komparativu nune’e mós sobrevivénsia wainhira la iha kbiit atu hola sasán importasaun sira. Redús 20% husi importasaun ne’e iha efeitu ne’ebé hanesan ho defisit komérsiu husi aumenta 600% ba esportasaun naun-petrolíferu sira, no ne’e fasil liu tan.
  • Karik presiza tarefas ka subsídiu sira atu ajuda dezenvolve produsaun lokál, nudár pratika ne’ebé halo iha nasaun industrializadu sira.
  • Infraestrutura ne’ebé importante liu mak la’ós ida atu loko-an nian. Estrada rurais, eskola primáriu sira iha bairru laran, eletrisidade renovavel ne’ebé desentralizadu, klínika saúde sira no fornesementu be ho saneamentu sei hadi’a liután ema nia moris duke projetu boboot sira ne’ebé gasta osan barak.

Lisaun 5: Prioritiza rekursu umanu sira.

  • Estadu mak responsabiliza atu garante ema hotu nia direitu ba edukasaun, hela fatin, tratamentu saúde, no saneamentu.
  • Kualidade universal edukasaun primáriu mak esensiál ba dezenvolvimentu no hadi’a ema nia kualidade moris, nune’e mós empregu no dezenvolvimentu ekonomia iha futuru.
  • Nutrisaun no tratamentu saúde ne’ebé la adekuadu bele limite permanente labarik ida nia futuru.
  • Fasil liu atu sosa bolsa estudu estranjeiru ida duke kria universidade ida, ka haruka polítika ida ne’ebé moras ba rai li’ur atu halo tratamentu duke kria ospitál di’ak ida, maibé kualidade fasilidade lokál sira mak sei eduka no trata ema di’ak liu fali.

Lisaun 6: Boa-governasaun presiza atensaun.

  • Lei sira tenke aplika ba ema hotu, inklui ofisiais, ajénsia estadu sira no investor estranjeiru no kontratór sira, liu liu iha area sira hanesan aprovisionamentu, protesaun ambientál, direitu rai, direitu sivíl no rekrutamentu.
  • Transparénsia ne’e iha folin wainhira informasaun asesivel, bele komprende no utiliza. Debate polítika sira tenke halo públiku, inklui oinsá no prosesu tanba sá mak desizaun sira ne’e halo.
  • Kompañia estadu sira no ajénsia autónomu sira dala barak la tama iha kontrola autoridade sira nian, no tanba ne’e presiza atensaun espesiál ba transparénsia, nune’e mós kontrolu no supervizaun ne’ebé ativu husi instituisaun demokrátiku sira.
  • Ezekusaun orsamentu ne’e la’ós medidas ne’ebé di’ak atu sukat governu nia rezultadu servisu -- hahalok na’ok ka gasta osan la ho kuidadu ne’e la fornese servisu públiku sira.
  • Maljestaun no desizaun ne’ebé ladi’ak bele estraga hanesan ho hahalok korrupsaun ne’ebé bele hare momoos los.
  • Opozisaun polítika ne’ebé nakloke, konstrutivu, pasífiku ne’e esensiál tebes ba demokrasia, cek no balansu, fó no simu, no ideia alternativu sira.
  • Media ne’ebé livre no sosiedade ne’ebé vital ne’e presiza tebes atu garante katak governu hala’o duni nia promesa sira no serbí interese públiku.

Lisaun 7: Konsulta ho públiku.

  • Rona ema sira ne’ebé mak sei hetan impaktu husi planu ka projetu sira, inklui alvu benefisiáriu sira – sosializasaun no promesa sira de’it ne’e la to’o. Implementasaun polítika tenke bazeia ba akordu ne’ebé informadu no livre, responde duni ba komunidade nia preokupasaun, nesesidade no direitu sira. Sentimentu na’in lokál ne’e presiza atu nune’e projetu ida bele susesu.
  • Prioridade ba despeza sira tenke bazeia ba saida mak di’ak liu ba públiku, la’ós buat ne’ebé sei halo desizaun na’in sira orgullu, riku ka poderozu.
  • Labele dezloka ka destitui sidadaun sira, liu sira ne’ebé marjinalizadu, atu nune’e ukun na’in sira simu ema VIP sira ne’ebé mai vizita. “Família bele la han” nudár nasaun ida, ne’e la própriu.

Lisaun 8: Ema hotu iha direitu ne’ebé hanesan ba benefísiu públiku sira.

  • Presiza esforsu atu ultrapasa diskriminasaun, atu garante kada sidadaun hetan ninia parte ne’ebé justu husi rekursu (ajuda ka mina) ne’ebé ema hotu na’in ba. (dominasaun husi reseita mina nian iha Timor-Leste ne’e signifika katak maski sira ne’ebé riku, sira ladún selu taxa.)
  • Idozu sira hetan osan dolar ida ba loron ida … anaunser sira veteranu. Maibé kontratadu sira ne’ebé iha ligasaun di’ak no polítika na’in sira hetan barak liu hotu.
  • Kiak sira labele simu benefísiu uitoan liu kompara ho ema riku sira. Povu iha area rurais merese atu hetan kualidade servisu no rekursu ne’ebé hanesan kompara ho sira ne’ebé hela iha kapitál, no sira nia nesesidade sira dala barak la karun atu responde ba.
  • Polítika sira ne’ebé bele benefísiu feto, labarik, ema ho defisiensia, ema ho edukasaun mínimu, ema ho servisu sein saláriu no grupu vulneravel seluk ne’e labele abandona.
  • “Kresimentu inkluzivu” bele hanesan manobra ida iha kondisaun ekonomia diskreditadu: Poderozu sira hetan ida mahar ne’e no kiak sira hetan nia restus. Ida ne’e labele substitui ekidade no justisa ekonómiku.
  • “Sosa dame” liu husi fó prémiu ba konstituentes insatisfeitu ka insistente sira sei hafraku estabilidade no koezaun iha longu prazu.
  • Aeroportu sira, auto-estrada sira, no eletrisidade subsídiu, sentralizadu responde liu ba ema uitoan ne’ebé riku no la’ós ema hotu mak bele uza. (Iha Timor-Leste, estadu gasta barak liu iha eletrisidade duke iha tratamentu saúde – no ema uitoan de’it mak iha AC ka mákina fase bikan. Area rurais sira la iha podér liu iha sensu rua ne’e hotu.)

Lisaun 9: Suporta ema, la’ós “ekonómiku” teoritiku.

  • Inflasaun “Dutch disease”/Moras Olanda menus ona iha ekonomia dolarizadu Timor-Leste nian, hafoin kresimentu lalais iha gastu estadu nian menus ona. Ida ne’e bele redús liután liu husi aumenta produsaun lokál atu redús nesesidade ba fornesementu importasaun limitadu sira.
  • Kresimentu GDP bele indika manán iha grupu ki’ik ida, maski ema maioria sai kiak ba bei-beik. Haree husi rendimentu mediu ka patrimoniu sira, ka família sira ne’ebé moris iha liña pobreza nia okos, mak medidas ne’ebé di’ak liu atu sukat saúde ekonomia nian.
  • Wainhira “rendimentu nasionál” fila ba estadu (ne’ebé poupa pedasuk boot ida), GNI la refleta sidadaun sira nia prosperidade ka falta ida ne’e.
  • Bangladesh no Nepal, sira nia valor husi Index Riku-soin Umanu no Index Vulnerabilidade Ekonómiku di’ak liu fali ne’ebé mak bele hetan husi sira nia GNI, ne’e hatudu katak sira jere sira nia polítika sira ho di’ak.
  • GNI Timor-Leste nian ne’ebé aas ne’e barak liu mai husi rendimentu temporáriu husi mina no gas, no ne’e seidauk uza ho másimu atu hadi’a nasaun ne’e ninia HAI no EVI. Nune’e mós ho Giné Ekuatoriál, osan mina nian ne’e bele hanesan mós malisan.
  • Karik Timor-Leste mak gradua husi estadu Nasaun Menus Dezenvolvidu karik bazeia ba ninia GNI ne’ebé aas molok tinan 2020, nia bele sai nasaun primeiru ne’ebé mak sei falla no monu fali ba estadu Nasaun Menus Dezenvolvidu hafoin rai ne’e nia mina no gas maran, no ida ne’e iha tinan hirak tan de’it ona. Ida ne’e lojiku ka lae?
Ikus liu, ita hotu hatene katak maior parte Timor-oan sira menus idade 17.  Oinsa ho sira nia futuru?

It takes more than money to achieve development:

Lessons from and for Timor-Leste

Last October, the UN Economic and Social Council for Asia-Pacific (ESCAP) held a regional meeting on Financing Graduation Gaps of Asia‐Pacific Least Developed Countries in Bangladesh. At that meeting, Charles Scheiner from La'o Hamutuk led a discussion on ways to improve development based on Timor-Leste’s experience.

The UN calculates Least Developed Country (LDC) status from a combination of statistics: per capita Gross National Income, Human Assets Index (HAI: malnutrition, child mortality, literacy, school enrollment) and Economic Vulnerability Index (EVI: size, remoteness, economic diversity, agricultural stability, natural disasters, import dependency). Compared with other LDCs in the region, Timor-Leste scores high on GNI (due to oil and gas income), but our Human Assets Index is the second-worst (only Afghanistan is lower), while our EVI is about average, far from graduation requirements. However, many other Asia-Pacific LDCs have stronger human assets and less vulnerable economies, even though their governments have less cash.

The UN allows countries to emerge (“graduate”) out of LDC status if their income is very high, even if their EVI and HAI remain poor, a path being followed by Equatorial Guinea. This pattern represents a failure to utilize financial resources for public benefit. In fact, Timor-Leste may graduate from LDC status in a few years based on income alone, even though it will still fail the other two indicators.

The ESCAP conference included about 75 people from LDCs across the region -- Afghanistan, Bangladesh, Bhutan, Cambodia, Kiribati, Lao PDR, Myanmar, Nepal, Solomon Islands, Timor-Leste and Tuvalu. The organizers invited Charles Scheiner as a resource person to discuss non-financial aspects of emerging from Least Developed status: what can be learned from Timor-Leste’s difficulties in improving its HAI and EVI, in spite of having large oil revenues? The following is adapted from his presentation (also PDF). Although it was prepared for people from other countries, it may also be useful for those with new responsibilities in Timor-Leste’s restructured government.

Basic Facts about Timor-Leste

  • Timor-Leste restored its independence in 2002, after decades of war and centuries of foreign rule.
  • Oil and gas income is three-fourths of its economy and 93% of state revenues.
  • Its non-oil GDP grew rapidly from 2008 to 2012.
  • It has saved $16 billion in its Sovereign Wealth Fund (called the Petroleum Fund).
  • The oil fields could run out in six years, and the Petroleum Fund six years after that.
  • Its 1.2 million people are still among the poorest in the region, and most of them are less than 17 years old.
  • More than half of Timor-Leste’s people live in poverty, and the percentage is rising.
  • Two-thirds of people live in rural areas, largely by subsistence farming.
  • Poor sanitation and malnutrition are endemic.
  • About 1,200 Timorese children under 5 years old die from preventable conditions every year … 20 times more than people of all ages who die from physical violence.

Petroleum Dependency

  • Petroleum GDP in 2012                              $4,309 million (78%)
    Non-oil GDP in 2012                                    $1,246 million (22%)
       Productive sectors (agriculture & manufacturing)    $ 247 million (4%)
  • Projected state revenues in 2015    $2,530 million
    $  2,290 million (91%) will be from oil (including $916 million investment return)
    $     170 million ( 7%) will be from non-petroleum sources
    $       70 million ( 3%) will be borrowed from international lenders
  • 2015 State Budget    $1,570 million
    $ 1,328 million (85%) will come from the Petroleum Fund in 2015.
    $      72 million ( 4%) more is from the Petroleum Fund in the past and future.
  • Petroleum “income” goes to the government, not to the people.
  • State activities, paid for with oil money, comprise about half of the “non-oil” economy, because some of this money circulates in the local economy.
  • Balance of trade for goods in 2014: $526 million imports, $14 million non-oil exports (95% coffee)
Oil income peaked in 2012, dropping 15% in 2013 and 42% further in 2014.
Only South Sudan, Libya (and Equatorial Guinea?) are more dependent on oil and gas exports than Timor-Leste.

Lessons learned from Timor-Leste’s experience

Lesson 1: Sustainability is the right of future generations.

  • Development is an ongoing process, not a project which comes to an end.
  • Non-renewable or over-exploited resources will inevitably be used up, and must be replaced by something else.
  • This requires thinking and planning for much longer than a consultant’s contract, project timetable or electoral cycle.
  • Saving petroleum revenues helps, but they may not last beyond one generation.
  • Investment is not the same as spending – it must produce a tangible economic or social return in the future.
  • Infrastructure must be maintained after it is built, and the full life-cycle costs of maintenance, operation and debt service should be analyzed and budgeted before a project is approved. Timely maintenance is cheaper than repeated rebuilding.
  • Borrowing, whether through loans or implicitly through Public-Private Partnerships, can undercut sustainability if repayments are higher than return or persist longer than income or the project’s earnings.

Lesson 2: Planning is essential.

  • Planning should be long-term, both for overall development and for individual projects. It should be based on technical, social and financial considerations and viability, not politicians’ agendas or promoters’ suggestions.
  • Infrastructure projects should provide real benefits for people. They should be the appropriate size to meet reasonable forecasts of future needs.
  • Just because something is feasible doesn’t mean it’s the best or right thing to do.
  • Be creative and flexible– if a proposal turns out to be misguided, change it.
  • Don’t let a single sector or proponent distort decision-making and priorities – if you only have a hammer, everything looks like a nail.
  • Use 21st-century technology – decentralized, renewable and sustainable. Learn from others’ experiences, not by repeating their history or mistakes.
  • If plans and promises are not actually carried out, people will feel betrayed and disappointed.
Planning should be based on data.
  • Accurate, timely information is essential – even on uncomfortable topics like poverty or policy weaknesses.
  • Don’t believe your own advertising – decisions should be based on facts, not on claims or dreams.
  • When data for past years is incorrect, apparent improvements or trends may be illusory.
  • Data should be meaningful: names on a school enrollment list are not the same as children actually learning.
  • A country is composed of human beings, not dollars, and so is an economy. Measures like GNI and GDP show how a wealthy few are doing, and don’t reflect the lives of the impoverished majority.

Lesson 3: Recognize the context.

  • Legacies from past conflict and oppression, including autocracy, trauma, impunity and inexperience, must be addressed. They will not disappear by themselves.
  • Citizens and leaders in a new nation don’t trust that the “Rule of Law,” will always protect the weak from arbitrary power, including from the state. They need to be shown, not just told.
  • Initial progress from a very low base (“ground zero”) is not too hard, but doesn’t go very far toward achieving people’s rights.
  • Citizens became strong during difficult times; consider them your greatest resource.

Lesson 4: Achieve sovereignty and diversification.

  • An economy cannot stand on one leg. Petroleum will not be replaced by one single sector, but many.  Eco-tourism, small industries, agriculture and food processing can provide jobs, income and basic needs.
  • People have to eat before they can spend, and farming should prioritize local nutrition over export crops. Food and economic sovereignty are as important as political sovereignty.
  • Local production should substitute for imports, which provides competitive advantages as well as survival when imports are unaffordable. Reducing imports by 20% has the same effect on the trade deficit as increasing non-oil exports by 600%, and is a lot easier.
  • Tariffs or subsidies may be needed to help develop local production, just as they were in industrialized countries.
  • The most important infrastructure is not glamorous. Rural roads, neighborhood primary schools, decentralized renewable electricity, health clinics and local water supply and sanitation will improve people’s lives much more than costly megaprojects.

Lesson 5: Prioritize human resources.

  • The state is responsible to ensure everyone’s rights to education, housing, health care, and sanitation.
  • Universal quality primary education is essential for developing and improving people’s quality of life, as well as for future employment and economic development.
  • Inadequate nutrition and health care can permanently limit a child’s future.
  • It’s easier to buy an overseas scholarship than to create a university, or to send a sick politician abroad for treatment than to create a good hospital, but quality local facilities will educate and treat far more people.

Lesson 6: Good governance requires attention.

  • Laws should apply to everyone, including officials, state agencies and foreign investors and contractors, especially in areas like procurement, environmental protection, land rights, civil rights and personnel.
  • Transparency is only useful when information is accessible, understood and utilized. Policy debates should be public, including how and why decisions are made.
  • State-owned companies and autonomous agencies are often outside usual lines of authority, and therefore need special attention to transparency, as well as active control and supervision by democratic institutions.
  • Budget execution is not a good measure of government performance -- stealing or wasting money does not deliver public services.
  • Mismanagement and poor decisions can be as damaging as outright corruption.
  • Open, constructive, peaceful political opposition is essential to democracy, providing checks and balances, give and take, and alternative ideas.
  • A free media and vital civil society are necessary to ensure that government keeps its promises and serves the public interest.

Lesson 7: Consult with the public.

  • Listen to people who will be affected by plans or projects, including intended beneficiaries – socialization and promises are not enough. Project implementation must be based on free, prior and informed consent, responding to community concerns, needs and rights. A local sense of ownership is necessary for a project to succeed.
  • Spending priorities should be based on what is best for the public, rather than what makes decision-makers proud, rich or powerful.
  • Citizens, especially marginalized ones, should not be displaced or deprived so that leaders can welcome visiting VIPs. “Family hold back” is not appropriate for a nation.

Lesson 8: Everyone has an equal right to public benefits.

  • It takes effort to overcome discrimination, to ensure that each citizen gets her fair share of resources (aid or oil) that belong equally to everyone. (The dominance of oil revenues in Timor-Leste means that even the rich hardly pay taxes.)
  • The elderly get a dollar a day … unless they’re veterans. But well-connected contractors and politicians get much more.
  • The poor should not receive fewer benefits than the rich. People in rural areas deserve the same quality of services and resources as those in the capital, and their needs are often less costly to satisfy.
  • Policies that would benefit women, children, the disabled, the uneducated, the unwaged and other vulnerable people should not be neglected.
  • “Inclusive growth” can be a euphemism for discredited trickle-down economics: the powerful get fatter and the poor get crumbs. It must not substitute for economic justice and equity.
  • “Buying peace” by rewarding disaffected or insistent constituencies will undermine stability and cohesion in the long term.
  • Airports, highways, and subsidized, centralized electricity address the needs of the wealthy minority and are not used by most people. (In Timor-Leste, the state spends more on electricity than on health care – and very few people have air conditioners or dishwashers. Remote areas are powerless in both senses.)

Lesson 9: Support real people, not theoretical "economics."

  • “Dutch disease” inflation has dropped in Timor-Leste’s dollarized economy, since rapid growth in state spending has slowed. It could be reduced further by increasing local production to reduce the demand for supply-limited imports.
  • GDP growth can indicate gains for a small minority, even as most people get poorer. Median income or assets, or families living below the poverty line, are a better measure of economic health.
  • When most “national income” goes to the state (which saves the bulk of it), GNI does not reflect citizens’ prosperity or the lack thereof.
  • Bangladesh and Nepal have better Human Assets and Economic Vulnerability Index scores than would be expected for their GNI, indicating well-managed policies.
  • Timor-Leste’s high GNI is mainly composed of temporary oil and gas income, and it has not been effectively used to improve its HAI and EVI. As in Equatorial Guinea, oil money can be a curse.
  • If Timor-Leste graduates from Least Developed Country status solely based on its high GNI before 2020, it could be the first country to retroactively fail and re-enter LDC status after the oil and gas runs out in only a few years. Does this make sense?

What's in their future?

02 February 2015

Unconstitutional Resolutions

La'o Hamutuk recently received an in-depth legal analysis of the three resolutions by Government and Parliament which resulted in the removal of foreign judges and advisers from the judicial sector in Timor-Leste at the end of October 2014.  The 11-page analysis, which was prepared for an institution which decided not to issue it officially,  concludes:
  • The Resolutions are contrary to the Constitution as they contravene the principles of the separation of power and the independence of the judiciary. As a result, they are invalid and unenforceable.
  • The Resolutions purport to enact law on a matter over which neither the National Parliament nor the Government has competence under the Constitution and are therefore invalid and unenforceable.
  • The Resolutions are unenforceable because they are inconsistent with superior laws.
  • The notification by the Ministry of Justice purporting to cancel the employment contracts of the international judges may in fact be of no legal effect, depending on the nature of the contractual arrangement governing their employment. The notification may also be invalid as a matter of contract law.
  • Because of the invalidity of the Parliamentary Resolution and the First Government Resolution, and doubts around the validity of the purported cancellation of the international judges’ employment agreements, the Second Government Resolution is also invalid. Accordingly, any action taken by the Immigration Service or the Police to enforce the Second Government Resolution may also be subject to a legal challenge.
We have posted this analysis to http://www.laohamutuk.org/Justice/2014/ExpertLegalOpinion.pdf and hope that it will improve people's understanding of these issues. Other documents and analyses in English, Portuguese and/or Tetum, including a comprehensive one by JSMP, are also linked from http://www.laohamutuk.org/Justice/2014/14Judges.htm.  We look forward to reading the report from the Justice Sector Audit requested by Parliament, which is supposed to be presented to Parliament and the public early in 2015.

23 December 2014

Sadly, TL government blocks IMF Report

Timor-Leste’s Government has prevented the International Monetary Fund (IMF) from publishing its 2014 “Article IV Consultation” report on Timor-Leste. Because of irresolvable disagreement over the report’s content, the Government decided not to allow the release of the report this year.  La’o Hamutuk is saddened by this decision, as we believe that information from a variety of viewpoints is essential to developing sustainable, equitable economic and fiscal policies.

These reports, around 55-70 pages, usually contain a Staff Report, an Informational Annex and a Debt Sustainability Analysis. Many governments request changes to draft reports, and the IMF often incorporates them, as well as “Authorities’ views” setting our the government’s perspective. However, the IMF will not publish a report or press release about an Article IV Consultation without the Government’s consent. In 2013, 99% of countries agreed to publish a press release, and around 90%, including Timor-Leste, agreed to publish the detailed report.

IMF Article IV reports on Timor-Leste were published for 2013, 2011, 2010, 2009, 2008, 2006, 2005, 2004 and 2003, and 2014 was the first time the government did not consent.

La’o Hamutuk does not always agree with the IMF, particularly regarding economic justice, borrowing and the role of the private sector. However, these reports are an important contribution toward understanding Timor-Leste’s economy, and we are disappointed that the public, including ourselves, have not been able to read the latest one.

The information in the IMF's October press release which summarizes the suppressed report needs deeper elaboration and thought. It mentions dependency on declining oil reserves, excessive government spending, slow private sector growth, more thought needed for special economic zones, the shortage of good data and other issues.

Read more at http://www.laohamutuk.org/econ/IMF/14TLblocksIMF.htm.