Has TL become a problem child?

The lead editorial in the March 2013 Petroleum Economist is about Timor-Leste, entitled "Going for Broke." Although an annual subscription to the magazine is very expensive, you can download the complete editorial here or read it below.

The article discusses the failure of Timor-Leste's oil revenues to improve the lives of our people, observing that Timor-Leste, a former "poster child for developing nations" for petroleum management, now "better resembles a problem child."

La'o Hamutuk wrote the same warning one year ago, blogging that Timor-Leste is going for broke. We explained that current spending trends (which were not significantly altered in the 2013 state budget) could empty the Petroleum Fund even before Bayu-Undan is exhausted around 2024. Petroleum Economist is less tactful, urging Prime Minister Xanana Gusmão to "be pragmatic and focus on ensuring Sunrise is developed and the revenues are used to underwrite the sustainable, long-term development of Timor-Leste’s non-oil economy. If this does not come to pass, it is hard to avoid the conclusion that Timor-Leste is a failed state-in-waiting."

People pay $2,160 per year to subscribe to this highly-respected, 80-year-old publication because they value the information it contains. We hope that such a credible, prestigious medium will help wake people up to the reality that petroleum wealth is often more of a curse than a blessing.

The complete text of Petroleum Economist's editorial follows.

TL’s wealth: for the past or for the future?

[Liga ba post ida ne'e iha lingua Tetum]

On 5 March 2013, the NGO Belun organized a workshop at Delta Nova, Dili, to launch Belun researcher Constantino Brandão’s report on the social impact of the administration process for veterans’ pensions, (Tetum or English). The event also included a panel discussion and a presentation from La’o Hamutuk researcher Juvinal Dias about the National Impact of Benefits for Former Combatants (PDF Tetum or English, PowerPoint Tetum or English).

La’o Hamutuk explained that 95% of state revenues, including those which pay for veterans’ pensions, come from unsustainable petroleum reserves. Timor-Leste’s limited oil and gas resources are not enough to finance state activities over the long term. When the state spends a lot on one sector, other sectors lose money.

The 2013 state budget appropriates $96 million for veterans’ pensions, which are escalating much faster than health or education expenditure.  Between 2008 and 2012, the Government spent about $199 million for pensions and scholarships for veterans, $24 million for emergency projects that veterans received, and $14 million for ceremonies, cemeteries and the Resistance Museum. In addition, veterans received more than 100 infrastructure projects worth around $78 million between 2010 and 2012.

According to an internal Finance Ministry document that La’o Hamutuk received, the Government expects to continue to pay veterans and their descendants until 2122. This document describes a reference case, which will spend $2.8 billion of Timor-Leste’s resources on veterans’ pensions. If the number of veterans increases and the minimum wage goes up, the Government could expend more than $7 billion for veterans. The Finance Ministry estimates that Timor-Leste’s total petroleum wealth is around $26 billion.

Today Timor-Leste confronts high inflation, around 11% during 2012. We have almost no domestic economy which can absorb state spending which circulates in the country.

In addition to inflation, Timor-Leste’s natural resources are very limited, and the Bayu-Undan and Kitan gas and oil fields will be empty in the next decade. In that decade our population will be larger, with the many children born after 1999 entering the labor force, and Timor-Leste will need to pay for state activities including physical and human development, public transfers, and repayment of debts which we began to incur last year.

Even more worrisome, during 2010-2012 state expenditures increased 31% per year, and our domestic revenues and return on Petroleum Fund investments remain small. If we continue in this direction, the Petroleum Fund will be empty by 2020. Without oil money, what will Timor-Leste use to pay veterans’ benefits? It would be better to invest in educating our children than to spend on former combatants.

La’o Hamutuk suggests that the policy for transferring public funds to veterans should be based on our nation’s economic reality, so that it will benefit our domestic economy rather than stimulating inflation and increasing the burden on poor people who are not among these beneficiaries.

TL nia riku soin: ba pasadu ka futuru?

[Link to this page in English]

Iha 5 Marsu 2013, NGO Belun organiza workshop ida iha Salaun Delta Nova, Dili, hodi lansa sira nia relatóriu peskiza kona-ba impaktu sosiál husi prosesu administrasaun pensaun ba veteranu sira, husi peskizadór Constantino Brandão husi Belun (English ka Tetun). Iha okaziaun ida ne’e, iha painél diskusaun no mós sesaun aprezentasaun hosi Juvinal Dias, peskizadór La’o Hamutuk kona-ba Impaktu Nasionál husi Benefísiu ba Antigu Kombatente sira (PDF Tetum ka English, Powerpoint Tetum ka English).
 
La’o Hamutuk aprezenta katak 95% hosi despeza estadu nian, inklui pensaun veteranu nian, mai hosi rekursu petrolíferu ida ne’ebé la sustentável. Timor-Leste nia rekursu rasik la barak atu bele finansia atividade estadu nian ba tempu naruk, nune’e bainhira estadu prioritiza setór ida, nune’e setór sira seluk lakon rekursu.

Iha tinan 2013, Governu aloka tokon $96 ba pensaun veteranu sira nian, gastu ida ne’e nia kreximentu lalais liu kompara ho despeza estadu nian ba setór edukasaun no saúde. Entre 2008 to’o 2012, maizumenus Governu aloka ona tokon $199 ba pensaun no bolsu estudu ba veteranu sira, tokon $24 ba projetu emerjénsia veteranu sira hetan, no tokon $14 ba seremonia, cemeterio no muzeu rezisténsia. Aleinde ida ne’e, entre 2010 to 2012, liu projetu infrastrutura atus ida ho nia valor maizumenus tokon $78 mak benefisia ona veteranu sira. 

Iha dokumentu internal hosi Ministériu Finansas nian ne’ebé La’o Hamutuk hetan, hatudu katak Governu halo hela projesaun atu selu veteranu sira no sira nia oan to’o tinan 2122. Dokumentu ne’e ilustra ho kazu referénsia ida katak Governu sei gastu biliaun $2.8 hosi total riku-soin Timor-Leste hodi selu pensaun ba veteranu sira. Nune’e bainhira númeru veteranu sira ne’e aumenta, no iha mudansa ba nivel saláriu mínimu nian, Governu sei gasta maizumenus biliaun $7 ka liu ba veteranu sira. Ministériu Finansas estimatiza katak Timor-Leste nia riku soin petróleu tomak maizumenus biliaun $26.

Situasaun ne’ebé Timor-Leste enfrenta mak, nivel inflasaun iha Timor-Leste sa’e maka’as, maizumenus 11% durante tinan 2012. Timor-Leste besik laiha kriasaun ekonomia rai-laran ida atu bele absorve gastu husi estadu ne’ebé sirkula iha rai-laran.

Aleinde inflasaun, Timor-Leste mós nia rekursu naturais limitadu tebe-tebes, iha dékada oin mai, ita nia kampu mina-rai Bayu-Undan no Kitan laiha ona. Iha dékada ida ne’e populasaun Timor-Leste mós aumenta, labarik sira ne’ebé foin moris hafoin 1999 sei tama ba kampu laboral, no Timor-Leste presiza rekursu atu finansia atividade estadu inklui selu ba dezenvolvimentu fíziku no umanu, transferénsia públiku inklui atu selu nia tusan ne’ebé ita hahú halo dezde 2012 liu ba.

Iha kazu ne’ebé ekstrimu liu mak, dezde 2010-2012 nivel despeza orsamentu estadu nian sa’e 31%/tinan, no ita nia reseita doméstiku no retornu investimentu Fundu Petrolíferu nafatin ki’ik. Situasaun ida ne’e mak karik la’o hela de’it, ita nia Fundu Petrolíferu sei maran iha 2020. Karik mina-rai maran tiha, saida mak Timor-Leste bele uza atu selu veteranu sira iha futuru? Di’ak liu atu investe atu eduka ita nia oan duke gasta ba antigu kombatante sira.

La’o Hamutuk sujere atu polítika transferénsia ba veteranu sira tenke bazeia ba situasaun ekonómiku rai laran, katak sei fó benefísiu ba ekonomia rai laran hodi la hamosu inflasaun ida ne’ebé boot hodi fó naha todan ba sira ne’ebé kiak no la’ós parte hosi benefisiariu sira.