Infrastructure for Timor-Leste’s people

Everyone agrees that Timor-Leste’s current infrastructure is unacceptable. Some parts still have not recovered from 1999, when Indonesian soldiers and police and pro-Indonesia militia destroyed almost everything they could. Most people have no running water, many villages are still not connected by passable roads, schools and public buildings are far below standard, lack of irrigation limits food production, we need more hospitals and clinics, and many villages still lack consistent electricity. Why aren't we building these facilities?

Timor-Leste allocated more than half of its 2011 and 2012 state budgets to physical infrastructure. Many, including La’o Hamutuk, are concerned that the lower priority given to human resources – health and education – will limit this nation’s future. We also wonder if a billion dollars to build the centralized, oil-powered electricity system is wise  -- solar panels on every house in the country would cost one-fifth this much, less than it will cost every year just to fuel and maintain the Hera and Betano power plants.

People across the country are crying out for infrastructure – especially rural roads, schools and water – to improve their lives and help them integrate into the national economy. To understand how the Government is responding, La’o Hamutuk reviewed 2011 spending on this sector. The Ministry of Finance published this information last April in the 2011 Budget Execution Report; current and historic data is on the Budget Transparency Portal.

The 2011 budget allocated $599 million to the Infrastructure Fund for projects costing more than one million dollars or taking more than one year to build. Three-quarters of this was for electricity, and $150 million was for everything else: water, schools, hospitals, government buildings, military bases, police posts, irrigation, roads, bridges, ports, public housing, airports, etc.

We don’t believe that spending money is the best way to evaluate effectiveness. It’s more important to look at the results -- if a project was completed with good quality and is being used. However, public expenditure is necessary (but not sufficient) to build infrastructure. Better design, procurement and project management can improve the value Timor-Leste gets for its money (experts tell us that road projects here cost twice as much as similar ones in Indonesia or the Philippines), but zero spending will produce zero results even with flawless implementation.

When the year’s finances were closed, 96% of the money allocated for the national electricity system had been disbursed, mostly with two foreign companies. However, only 30% of the money appropriated for all other projects was spent.

The blue diagonally striped bars show how much Parliament appropriated in the 2011 budget for large infrastructure projects in each sector, on the right-hand scale in millions of dollars. The rules of the Infrastructure Fund allow the Government to shift money around, and the red checkered bars (and red numbers) show the final allocation for the year. The green solid bars (and green numbers) show how much was spent during 2011. Although the Infrastructure Fund rules allow unspent money to be carried over to 2012, the budgeted amounts are what the Government had planned to spend in 2011 alone, even for multi-year projects.

The wide yellow bars, on the left hand scale, show what percentage of the final infrastructure budget allocation was actually spent in 2011. Although nearly all of the money for electricity was used, nothing was spent for housing, even though the import of prefabricated houses for the MDG-Suco program had been justified because of an urgent need to build them quickly. Only half of the small amount allocated for health infrastructure was spent, as was only 1/8 of the original education appropriation. Many people complain about the poor state of the road network, and the Government increased the transport allocation from $23 to $40 million during the year – but they only spent $11 million, 27%.

As the Fifth Constitutional Government begins work, we hope they will pay more attention to results and implementation. We also hope they will explore how Timor-Leste can get more value for its money, so that the cost of building infrastructure projects here will be comparable with the rest of Southeast Asia. Reforms in procurement, project management, and corruption prevention will help, but better fiscal analysis, project conception and design, leadership, quality control and supervision are also essential.

Before embarking on more megaprojects, the government should conduct sincere cost-benefit analyses, with transparency and public consultation, to determine if the social and economic return on the investment justifies the expenditure. We have only a few years of oil and gas money remaining – and if we don’t invest it wisely we will be left with nothing. At the start of 2012, Timor-Leste’s Infrastructure Fund had $121 million that wasn’t spent last year and $761 million more from the 2012 state budget, and was expecting $43 million more in loans. We encourage the new Government, as it begins to implement the Strategic Development Plan, to use Infrastructure Fund money for projects which will benefit our entire population – unlike the two biggest items: $261 million more for the electricity system and $100 million to begin building the Suai supply base for offshore petroleum activities.