Unfortunately, the article is outdated and incorrect, as it relied on data published more than two years ago. According to the latest IMF World Economic Outlook published in April 2015, Timor-Leste ranked 122nd (not 87th) in the world in 2013, and is expected to fall six more places in 2014. In the rosy picture relayed by the Ministry of Finance, Timor-Leste is richer than China, Indonesia, Cabo Verde and Fiji. However, current IMF data shows that we are poorer than all of these, although our economy is still proportionally larger than Guinea-Bissau and several ASEAN countries.
We all wish that Timor-Leste’s people were less poor, but wishing doesn’t make it so. We encourage policy-makers to base their decisions on evidence, and not to believe their own public relations. It will take smart thinking and hard work to bring Timor-Leste out of poverty.
Global Finance based its rankings on Gross Domestic Product per capita (GDP pc) adjusted for Purchasing Power Parity (PPP). This number represents the total value of all goods produced and services provided in a given country in a year, divided by the population. In order to compare with other countries, the figure is adjusted for cost of living and currency exchange rates. For example, if goods are cheaper in Timor-Leste than in most countries, adjusting for purchasing power would increase our GDP pc (PPP). The magazine’s article explains this in more detail.
For 2013, Global Finance said that Timor-Leste’s GDP pc (PPP) was $10,784, although it admits that everything after 2009 is an estimate. However, the newer IMF report (which uses estimates after 2011) says it was $5,581. We believe that the more recent estimate is lower because we now have better data and estimates of purchasing power parity.La’o Hamutuk is concerned that GDP does not reflect the lives of our communities, and we agree with Global Finance that “It is important to notice that GDP is not a perfect measure to describe the well-being and quality of life of populations… In fact, GDP is often considered imperfect even to measure overall economic strength.” By counting dollars instead of people, this indicator shows the wealth enjoyed by the more affluent part of the population, and ignores those who have no money. In addition, about 80% of Timor-Leste’s GDP comes from oil and gas, which employs hardly any people and whose money all goes to the state (which saves part of it while spending some on projects and programs). Furthermore, inflation and prices in Timor-Leste are volatile and different from our neighbors, and therefore adjustments for Purchasing Power Parity may not be accurate. Global Finance points out that “PPP estimates for developing countries are often rough approximations.”
The Ministry and the magazine based their articles on the IMF World Economic Outlook (WEO) published in April 2013, which acknowledged that data after 2009 were estimates. However, the IMF updates these figures annually. During the last two years, government and international agencies have improved their understanding of Timor-Leste’s economy, as shown in reports from the Directorate-General of Statistics, the IMF and others. The April 2015 WEO tells a different story, and we don’t understand why the Ministry didn’t use the most recent information available.
In the more recent information, we can see a disturbing trend – Timor-Leste’s ranking has been dropping since 2011 and is expected to continue to fall. This is not surprising -- Timor-Leste’s oil income is declining, while the world has recovered from the 2008-2009 global economic crisis.
Last June, Timor-Leste’s Directorate-General for Statistics (DGS) published new GDP data in its report on National Accounts 2000-2013, but it came out too late to be included in the April 2015 IMF report. DGS found that Timor-Leste’s GDP per capita dropped 16.8% from 2012 to 2013, without adjusting for purchasing power. This trend, which is likely to get worse as oil and gas reserves are depleted and petroleum prices stay low, means that the April 2015 IMF WEO probably overestimates the country’s 2013 GDP, making the Ministry of Finance and Global Finance articles even more distant from reality.
The Ministry was lucky (or persistent) to find an article describing Timor-Leste’s economy in a positive light. The internet has many tabulations like http://www.worldsrichestcountries.com/, and Timor-Leste is always far down the list. Although a few people may take perverse pride in the fact that some countries’ economies are even poorer than ours, the citizens of the Democratic Republic of Timor-Leste – especially impoverished rural residents whose lives are not reflected in these statistics – deserve better.
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Dear Lao Hamutuk
ReplyDeleteThanks for your analysis. The MoF is applauding which does not reflect local reality while ignoring such as GHI where puts Timor-Leste as the 3rd most hungriest country, just behind Eritrea and Burundi, in the world. If the country is getting richer which GHI has also gone up? Base on this, one could immediately see that two things, either data for wealth is wrong or the Wealth is only concentrated in the hands of a few. I judged based on my own observations, the data for wealth is wrong or outdated while the limited resources in country is also concentrating in the hands of the few, especially decision makers and their cronies.