The Timor-Leste-Australia Maritime Boundary Treaty

Timor-Leste won a great victory on 6 March, when Australia and Timor-Leste signed the Treaty Establishing Their Maritime Boundaries in the Timor Sea. After decades of occupation and struggle, the Australian government finally accepted its northern neighbor’s sovereign right to a border based on current international law. La’o Hamutuk has published a comprehensive article (also PDF) on the new agreement, which this blog summarizes.

Australia had prevented Timor-Leste from settling their common boundary since before the restoration of independence. From 2000 to 2013, Timor-Leste’s leaders conceded to Canberra’s stubbornness by signing agreements to enable oil and gas production – the young nation’s principal source of money. However, many felt that the struggle for national independence was incomplete without defined boundaries. In 2004, Timor-Leste civil society formed the Movement Against the Occupation of the Timor Sea (MKOTT) and friends in Australia formed the Timor Sea Justice Campaign, with support from activists around the world. Five years ago, Timor-Leste’s government has added its diplomacy to the people’s struggle.

The black line on the map represents the 1972 Australia-Indonesia seabed boundary treaty, which remains in force. The yellow area is the Joint Petroleum Development Area (JPDA), which was divided 50-50 between Indonesia and Australia from 1991 to 1999, and 90-10 between Timor-Leste and Australia since 2002. Under the Boundary Treaty nearly all of it belongs 100% to Timor-Leste, although Australia will not pay back the $2.4 billion it has taken in from this area.

The light green and pink is the “Sunrise Unitized Area”.  Under the 2002 Timor Sea Treaty, Timor-Leste was to get 18% of Sunrise upstream revenues; this was increased to 50% in 2007, and to 70% or 80% (depending on where the pipeline goes) by the new Boundary Treaty.

Conciliation leads to compromise

Australia withdrew from international maritime boundary dispute resolution processes just before Timor-Leste became independent in 2002. However, they overlooked a never-used mechanism in the United Nations Convention on the Law of the Sea (UNCLOS). UNCLOS Article 298 and Annex V describe a compulsory conciliation process through which one nation can bring another into bilateral boundary discussions which are facilitated by “conciliators” appointed by both sides, under United Nations auspices. The conciliators cannot make binding decisions; their role is to encourage the parties to listen to each other.

Timor-Leste initiated this process in April 2016 and, although Australia initially resisted, they accepted it by September. The conciliators started out like marriage counselors, listening to each party’s views and relaying them to the other party, while the two sides sat in separate rooms.

The process took a year and a half, with 13 sessions on four continents. In August 2017, Australia and Timor-Leste agreed on the overall outlines of a boundary and brought in the oil companies to help decide how Greater Sunrise would be developed. Although that question remains unresolved, the Boundary Treaty was signed in March 2018.

The Boundary Treaty is not a legal ruling handed down by a court. It evolved through diplomatic give-and-take, with each government arguing for and compromising on its positions. Although the conciliators facilitated the negotiations and encouraged compliance with international law, all decisions were made by the two governments. The final boundary compromise, shown as purple and white lines on the map, largely reflects Timor-Leste’s median line claim for the southern part, while drawing lines in between the two nations’ claims for the lateral boundaries on both sides. It delineates each country’s seabed and water column areas, although Timor-Leste’s boundaries with Indonesia are still to be negotiated.

Three oil and gas fields have been commercially developed in the JPDA: Elang-Kakatua was shut down in 2007, Kitan closed in 2015, and Bayu-Undan has 2-3 years of production remaining. Many other exploration contracts have been signed and relinquished the JPDA, with 70 test wells drilled over the last three decades, so that there are probably no undiscovered, significant, commercially-viable, oil and gas reserves (other than Greater Sunrise).

All new government revenues from the JPDA will go to Timor-Leste once the treaty is ratified, which could increase Dili's take by about $100 million from Bayu-Undan’s last puddles of oil and gas.

On the western side of the JPDA, the southern part of the (white) lateral boundary is further west than the edge of the JPDA. As a result, the small Buffalo field now belongs to Timor-Leste. Buffalo produced 20 million barrels of oil from 1999 until it shut down in 2005, and Australia will keep those revenues. In 2016, a new contract was signed with a new company which hopes to use modern technology to extract about 30 million more barrels. If they do, Timor-Leste could receive $500 million.

The larger Laminaria-Corallina oil field, which has generated more than $2 billion for Australia and is nearing the end of its productive life, remains in Australian waters.

On the eastern side, the central part of the eastern edge of the JPDA has moved outwards, placing more of Greater Sunrise and the area south of it in Timor-Leste’s waters. For the moment, a (white) line has been drawn through the Sunrise Unitized Area, placing 30% of the field in Australia and 70% in Timor-Leste. As the field is still in both countries, it will be managed jointly; both nations need to agree on how it will be developed. The Treaty and conciliators offered several inducements for Timor-Leste to accept a pipeline from Sunrise to the soon-to-be-idle Darwin LNG plant (which has been processing Bayu-Undan gas), but Dili politicians reject this option.

Both lateral boundaries are provisional. They will be shifted outwards to line up with a future Indonesia-Timor-Leste boundary after Laminaria-Corallina (on the east) and Sunrise (on the west) have finished their productive lives.

Governance agreements and Greater Sunrise

The new Treaty re-authorizes the “Designated Authority” (DA), currently the National Petroleum and Minerals Authority (ANPM). This regulatory body signs contracts and oversees petroleum operations in Timor-Leste and jointly administered land and sea territory, as well as encouraging further development.

Because the Sunrise Unitized Area is still under bi-national oversight, the DA’s work there is overseen by a “Governance Board” (GB) which will rule on “Strategic Issues” relating to the Sunrise project, making decisions by consensus.  If the GB cannot agree, the DA or the Sunrise contractors may use a Dispute Resolution Committee (DRC) consisting of one representative of each country and a third member chosen by the other two.

Under the new Treaty, the four 2003 Greater Sunrise contracts will be replaced by a single one between the Designated Authority and the Sunrise Joint Venture (Woodside, ConocoPhillips, Shell and Osaka Gas). La’o Hamutuk hopes that it, as well as new contracts for Buffalo, Kitan and Bayu-Undan will comply with transparency requirements in Timor-Leste law.

The parties were unable to agree on a Sunrise Development Concept (including the location of the pipeline and LNG plant) before the Boundary Treaty was signed. Annex B of the Treaty defines a Special Regime for Greater Sunrise, referring to “the approved Development Concept,” but does not say how it is to be approved. It presumably needs the consent of both governments and the Sunrise Joint Venture.

In 2008, La’o Hamutuk wrote Sunrise LNG in Timor-Leste: Dreams, Realities and Challenges, most of which  is still accurate.  A detailed assessment of whether it would be good for Timor-Leste to pipe Sunrise gas to Beaçu is beyond the scope of this article. The currently politicized controversy, with accusations and disinformation, does not encourage rational discussion.

Regardless of how Sunrise is developed, La’o Hamutuk worries that exaggerated promises of vast economic benefits may distract from the urgent need to diversify Timor-Leste’s economy away from oil and gas.

Before a Sunrise decision is made, Timor-Leste needs to objectively weigh the financial, economic, environmental and social benefits, costs and risks. Although many studies have been done, none of the published ones we have seen provide accurate and unbiased analysis. Sunrise should be developed to serve the interests of the people of this country, rather than a particular oil company, political faction or region.

According to the most optimistic credible projections, Sunrise can finance Timor-Leste for less than one generation. We owe it to our children and grandchildren to think further ahead, and not to be swayed by emotional, partisan or personal considerations.

What happens now?

Closed-door discussions will continue on the Sunrise Development Concept, and the transitional arrangements for the Bayu-Undan and Kitan contracts will be implemented.

Before the Boundary Treaty becomes legally effective, it must be ratified by both countries. Until then, Australia will continue to receive 10% of Bayu-Undan revenues (about $4 million per month).

Timor-Leste’s next Council of Ministers and newly-elected National Parliament can probably ratify the Treaty by September, and we encourage consultation and consistency with Timor-Leste law. Australia’s process may also take six months, and requires a Parliamentary Inquiry. We hope that there will be no unnecessary delays.

Timor-Leste will resume negotiating its maritime boundary with Indonesia this year, and it should be easier than with Australia. Once this is settled, Australia and Indonesia will be able to amend and ratify their draft 1997 Water Column Boundary Treaty.

However, nothing in the new Australia-Timor-Leste Boundary Treaty disturbs the Australia-Indonesia Seabed Treaty which has been in effect for 46 years. Although some in Indonesia feel that the older treaty was unfair, Australia has no obligation to renegotiate it.

The new Boundary Treaty says that Timor-Leste shall not “have a claim for compensation” for money already collected by Australia, around five billion dollars. However, the Treaty cites “good neighbors and in a spirit of cooperation and friendship … in order to achieve an equitable solution.” In this new climate of mutual respect, Australia should return what it took during the nearly 30 years that it profited from supporting Indonesia’s brutal and illegal occupation of this country.

Depois tinan 18: Presiza atu husik Dolar Amerika?

Link to this post in English

Iha 29 Janeiru 2018, Institute of Business (IOB) organiza seminar nasionál ida ho Títulu Bele ka lae Timor-Leste iha moeda rasik? Perspectiva no desafius? ne’ebé reprezentante governu, akadémiku no sosiedade sivíl sira fahe sira nia hanoin kona-ba posibilidade ba Timor-Leste atu implementa nia moeda rasik. Juvinal Dias hosi La’o Hamutuk fó apresentasaun ida hamutuk ho panelista sira seluk hanesan Ministru Finansa Rui Gomes, Banku Central Timor-Leste nia Diretór da Divisão de Estudos Económicos e Estatísticos Gastão de Sousa, Profesór Brett Inder hosi Universidade Monash. Kliik iha kada naran atu bele download sira nia apresentasaun.

Artigu tuir mai ne’e refleta ba apresentasaun La’o Hamutuk nian.

Iha 2000, bainhira Administrasaun Tranzisaun ONU nian (UNTAET) administra Timor-Leste, UNTAET, FMI no lider Timor oan sira balu fó rekomendasaun atu halo dolarizasaun. Iha tempu ne’ebá, moeda balu sirkula hela iha ekonomia Timor-Leste. Indonesia nia rupiah sirkula maka’as iha merkadu no area rural sira, dolar Australia sirkula iha negósiu sira ne’ebé nia na’in sira mai hosi rai li’ur, funsionáriu sira hosi ajénsia ONU nian ne’e selu ho dolar Amerika, no Timor oan balu simu sira nia pensaun ho escudo Portuguese nian. Tanba laiha fasilidade ofisiál ne’ebé eziste atu troka moeda sira, nune’e, kámbiu ka prosesu troka moeda nian tomak iha tempu ne’ebá esensialmente tuir “merkadu ilísitu ka pasar gelap,” ne’ebé nia presu la konsistente ho merkadu loloos nian.

Administrasaun tranzisaun hili dolar Amerika ho razaun lubuk. Rupiah Indonézia la estavel, tanba nia valor monu maka’as iha krize monetariu 1997-1998 no kontinua tun sae iha tinan sira tuir. Portuguese nia escudo la uza ona iha Portugal no agora troka ona ho euro. FMI no instituisaun sira seluk dudu atu halo dollarizasaun hodi koko halo ekonomia Timor-Leste nian sai estavel liu, liu hosi previsibilidade presu, regula kámbiu no hamenus konfiansa ema nian ba merkadu ilísitu. Dolar Amerika uza ona hosi UNTAET, relativamente estavel iha merkadu global, tanba hetan apoiu hosi ekonomia ida ne’ebé forte, no nudár moeda referénsia ba presu mina-rai mundiál.

Benefísiu sira bainhira uza dolar Amerika

Estabilidade presu hosi kámbiu internasionál nian

Valor hosi moeda foun dala barak tun sae bainhira merkadu global koko atu determina sira nia valor relativu ba moeda sira seluk. Valor moeda ne’e bazeia ba istória kréditu ne’ebé eziste, desizaun ba polítika monetariu tempu naruk no dezempeñu ekonómiku nian. Moeda foun sira seidauk hetan teste kona ba sira nia resposta sira ba kondisaun ekonómiku sira ne’ebé diferente, no, nune’e susar atu determina valor kámbiu nian ne’ebé apropriadu iha tempu badak nia laran.

Iha Timor-Leste nia kazu, instituisaun nasionál sira seidauk provadu katak sira bele reziste ba tentasaun hodi prodús osan barak liu tan bainhira ekonomia nasaun iha periodu difisil nia laran. Ita nia moeda bele sai estavel liu tan ba tempu naruk, bainhira Banku Sentrál estabelese polítika rejistu ida ne’ebé di’ak, maibé to iha valor ne’ebé atu fluktua.

Estrutura instituisaun foun

Obstákulu ida ne’ebé dala barak nasaun sira ne’ebé foin hetan nia independénsia enfrenta mak sira nia instituisaun sira seidauk iha esperiénsia. Risku boot hosi obstákulu ne’ebé mak instituisaun sira ne’e dala barak hili dalan potensiál hodi uza koreksaun ne’ebé baratu no lalais ba sira nia ekonomia – hanesan prodús osan atu hamenus defisit orsamentál ka fó kréditu ba banku sira – ne’ebé bele iha impaktu sira ne’ebé bele kria inflasaun ka muda valor kámbiu iha futuru.

Dolar Amerika bele proteje nasaun sira hosi krize makroekonomiku sira hanesan hiperinflasaun, ne’ebé bele mosu mai hosi desizaun ba polítika monetariu ne’ebé perigozu, hanesan labele kontrola produsaun osan. Nasaun balu hetan ona hiperinflasaun, hanesan Venezuela no Zimbabwe, ne’ebé bainhira enfrenta ona obstákulu sira hanesan ne’e, susar ba sira atu ultrapasa hodi iha kreximentu ekonómiku tanba sira nia moeda nia valor menus ba bei-beik. Iha situasaun sira hanesan ne’e, presu ba importasaun haksoit sae, no presu ba sasán sira ne’ebé prodús iha rai laran la bele predikte ona, investidór sira sei sai ba rai seluk, no sidadaun sira labele rai sira nia osan tanba sira nia valor osan sei monu tun lor-loron.

Seguransa ba investidór rai li’ur no domestiku

Moeda ne’ebé relativamente estavel sei halo investidór sira iha konfiansa katak sira nia valor investimentu sei prezerva ba tinan naruk.

Investor sira fó konfiansa valor dolar Amerika, no nune’e, daudauk ne’e investor sira konfia katak sira nia valor investimentu iha Timor-Leste ba tinan oin mai sei la diferente boot kompara ho valor investimentu iha tinan ida ne’e. Heineken lista dollar Amerika nudár atrasoens prinsipál ida entre sira seluk ne’ebé lori sira hodi loke sira nia fábrika iha Timor-Leste. Pelu menus ba kurtu prazu, moeda nasionál Timor nian sei la enkoraja investimentu iha Timor-Leste tanba sei halo investimentu sira ne’e relativamente risku liu.

Merkadorias lubuk mak sosa no fan ho dolar Amerika

Timor-Leste iha merkadorias boot rua ne’ebé esporta, mak petrolíferu no kafé, buat rua ne’e fan iha merkadu global ho dolar Amerika. Nune’e, uza dolar Amerika parsialmente ajuda Timor-Leste nia ekonomia hosi ameasa hosi flutuasaun presu merkadorias nian.

Impaktu hosi presu mina-rai ne’ebé monu iha 2014 ba Timor-Leste nia ekonomia nudár lisaun ida atu aprende tanba nasaun ne’e uza dolar Amerika. Durante tempu ne’ebá, dollar amérika nia valor boot liu kompara ho Rupiah no moeda seluk, nune’e hamenus tiha kustu hosi importasaun sasán. Nia rezultadu mak Timor-Leste nia inflasaun monu hosi 12% iha 2013 ba besik atu zero iha tinan 2014. Maske Estadu simu osan menus hosi nia esportasaun petrolíferu, maibé presu ne’ebé ema selu ba sasán sira la sae ona.

Dezafiu sira bainhira uza dolar Amerika

Lakon kontrolu ba polítika monetariu

Polítika monetariu nudár instrumentu ida ne’ebé banku sentrál uza hodi responde ba situasaun ekonómiku ne’ebé diferente liu hosi ajusta nasaun nia fornesimentu osan ka taxa de juros nian. Tanba uza dolar Amerika, Timor-Leste husik tiha nia podér atu halo desizaun ba polítika monetariu nian. Se lae, Banku Sentrál bele uza instrumentu sira ne’e hodi bele estabiliza ekonomia no ajuda nasaun hodi rekupera hosi xoke sira hosi externa.

Bainhira iha xoke balu ba ekonomia, Banku Sentrál bele devalua nia moeda atu halo esportasaun sira sai kompetitivu liu, nune’e, bele kompensa ba lakon sira ne’ebé mai hosi xoke.

Ezemplu mak: kafé nudár Timor-Leste nia export naun petrolíferu ida ne’ebé boot liu. Produsaun kafé bele hetan impaktu negativu hosi xoke sira hosi externa hanesan kondisaun klima ne’ebé ladi’ak ka moras ai-horis nian ne’ebé da’et ba plantasaun
lubuk. Iha kazu hanesan ne’e, Banku Sentrál bele uza nia polítika monetariu hodi devalua nia moeda, nune’e halo sasán sira ne’ebé prodús iha rai laran bele relativamente baratu ba konsumidór sira hosi rai li’ur. Nune’e, aumenta fan ba sasán esportasaun seluk bele kompensa valor ne’ebé tun hosi fan kafé nian. Maske nune’e, importante atu nota katak daudauk ne’e, Timor-Leste seidauk bele hetan benefísiu barak hosi uza tipu instrumentu polítika monetariu hanesan ne’e tanba ita seidauk iha produtu esportasaun barak.

Obstákulu ba diversifikasaun

Valor moeda nasionál Timor-Leste nian bele sai fraku liu kompara ho dolar Amerika, hodi halo importasaun sasán sira sai karun liu no produtu lokál sira relativamente baratu bainhira halo komparasaun. Produtu lokál sira bele kompete ho sasán importasaun ne’ebé karun liu iha merkadu doméstika. Tuir mai, produtór lokál sira sei fan sira nia produtu barak, hadi’ak sira nia produtividade no aumenta sira nia produsaun ba tempu naruk. Bainhira produsaun no produtividade aumenta, produtu Timor-Leste nian sei sai kompetitivu liu iha eskala global ida, nune’e bele haluan liu esportasaun naun petrolíferu nian. Ida ne’e bele sai instrumentu ida atu ajuda Timor-Leste hodi diversifika nia ekonomia no enkoraja kreximentu iha setór naun petrolíferu iha futuru.

Valor as hosi dolar Amerika nudár parte ida hosi esplikasaun kona-ba ba dependénsia Timor-Leste nian ba importasaun, tanba fó dalan ba Timor-Leste hodi importa sasán sira ho presu ida ne’ebé baratu  liu kompara ho sasán sira ne’ebé produtór doméstiku sira prodús hodi kompete ba. Troka sasán importasaun balu ho sasán sira ne’ebé prodús iha rai laran bele hahú ona hodi taka tiha diferensa entre sasán importasaun no sasán esportasaun naun petrolíferu nian, ne’ebé sei sai nudár pasu importante ida ba sustentabilidade ekonómiku bainhira produsaun mina-rai hotu ona no bainhira Fundu Petrolíferu hotu iha dékada balu oin mai.

Timor-Leste prontu ona ka lae?

Oradór sira hotu iha seminar IOB nian, inklui La’o Hamutuk, konkorda katak sedu liu ba Timor-Leste atu implementa nia moeda nasionál ida. Timor-Leste sei implementa nia moeda nasionál ida iha futuru, maibé tenke hahú ho dezenvolve nia setór ekonomia naun petrolíferu sira, ne’ebé inklui agrikultura, turizmu no indústria ki’ik sira. Tanba bainhira implementa moeda nasionál agora, ida ne’e sei hadalan ita hodi aumenta presu ba sasán importasaun sira, nune’e bele hafraku kapasidade ema nian atu sosa sasán bainhira iha tempu ne’ebé hanesan produtu doméstika nian kontinua menus. Aleinde ne’e, polítika monetariu ne’e sei la sai instrumentu polítika ida ne’ebé efikás bainhira ita labele ajusta ho setór esportasaun barak ne’ebé diferente.

Setór produtivu sira hosi PIB (Produtu Interna Bruto) - naun petrolíferu sira mak agrikultura no fabrikasaun, ne’ebé estagnada dezde 2003. Despeza governu nian mak lori besik kreximentu tomak iha PIB naun petrolíferu, no despeza ida ne’e sei tun iha tinan sira oin mai bainhira rendimentu petrolíferu nian hotu ona no saldu Fundu Petrolíferu nian tun.

Hafoin setór produtivu sira, hosi naun petrolíferu kontribui maka’as ona ba ekonomia, entaun Timor-Leste bele konsidera ona atu iha nia moeda nasionál rasik.

Rekomendasaun balu ba tempu ohin nian

La’o Hamutuk rekomenda katak ukun na’in sira presiza foti nesesidade ne’ebé sériu liu atu diversifika ekonomia. Ita iha faze urjente atu iha polítika sira ne’ebé proativu liu hodi nune’e bele enkoraja kreximentu sustentável hosi setór produtivu sira hosi naun petrolíferu.

Dalan ida ne’ebé nasaun sira bele hili atu aumenta sira nia produsaun lokál no gradualmente substitui importasaun ho nia produtu lokál mak introduz kombinasaun ida hosi aplika tarefa ba importasaun no introduz subsídiu governu nian ba setór tarjetu sira. Polítika hirak ne’e bele proteje ita nia indústria doméstika tanba bele dezenvolve kapasidade rai laran ho produtu sira ne’ebé importa mai. Ba tinan naruk nian, bainhira produsaun lokál aumenta buras, Timor-Leste sei bele hakotu aplikasaun tarefa no subsídiu sira ne’e, nudár rekezitu ida ne’ebé presiza atu kumpre hosi rekizitus sira ne’ebé merkadu livre ASEAN nian promove.

Povu Timor-Leste atinje ona sira nia soberania nasionál hafoin luta no sakrifisiu iha tinan barak nia laran, no atu iha nia moeda nasionál rasik, ita bele hare nudár benefísiu ida hosi vitória ukun rasik an nian. Maske nune’e, ita presiza atu asegura katak moeda ne’e rasik mós tenke materialmente fó benefísiu ba povu iha nasaun ida ne’e, espesialmente sira barak ne’ebé seidauk goza benefísiu ekonómiku hosi independénsia ida ne’e.

18 Years Later: Should Timor Drop the U.S. Dollar?

Liga ba artigu ida ne'e iha Tetum

On 29 January 2018, the Institute of Business (IOB) hosted a national seminar entitled Bele ka lae Timor-Leste iha moeda rasik? Perspectiva no desafius?, where representatives of government, academia and civil society shared ideas regarding the possibility of Timor-Leste implementing its own currency. Juvinal Dias from La’o Hamutuk gave a presentation alongside Minister of Finance Rui Gomes, Director of the Economics and Statistics Division of the Central Bank Gastão de Sousa, and Monash University Professor Brett Inder. Click on each name to download their presentation.

The following article reflects La’o Hamutuk’s presentation.

In 2000, while the UN Transitional Administration (UNTAET) was governing Timor-Leste, UNTAET, the IMF and some Timorese leaders recommended dollarization. At that time, several currencies were circulating in Timor-Leste’s economy. The Indonesian rupiah was widely used in markets and rural areas, Australian dollars circulated among businesses patronized by expatriates, employees of UN agencies were paid in U.S. dollars, and some Timorese citizens received pensions in Portuguese escudos. As no official currency exchange facilities existed, all foreign exchange was essentially “black market,” with no consistency of rates.

The transitional administration chose the U.S. dollar for various reasons. The Indonesian rupiah was very unstable; it had crashed in 1997-1998 and remained volatile in the coming years. The Portuguese escudo was being phased out in Portugal and replaced by the euro. The IMF and others pushed for dollarization to try to make the Timorese economy more stable, through price predictability, regulated foreign exchange and reduced reliance on the black market. The U.S. dollar was already used by UNTAET, was relatively stable on the global market, backed by a strong economy, and was the reference currency for the world oil market.

Benefits to using the U.S. dollar

International exchange rate stability

The value of new currencies often fluctuate as the global market tries to determine their worth relative to all other currencies. Currency values are based on existing credit history, long term monetary policy decisions and economic performance. New currencies are untested in their responses to different economic conditions, and therefore in the short-term it is difficult to determine the proper exchange rate.

In the case of Timor-Leste, national institutions have not yet proven that they can resist the temptation to print more money during economic hard times. Our currency could become more stable over time, as the Central Bank establishes a good policy record, but until the value would likely fluctuate.

Structure for young institutions

One challenge often faced by newly independent countries is having inexperienced institutions. The biggest risk is the potential use of cheap and quick fixes for the economy – such as printing money to reduce a budget deficit or providing credit to banks – which could have devastating impacts on inflation and exchange rates in the future.

Using the U.S. dollar protects countries from macroeconomic crises such as hyperinflation, which can result from dangerous monetary policy decisions, such as uncontrolled printing of money. Countries afflicted by hyperinflation , such as Venezuela and Zimbabwe, have had to face seemingly insurmountable obstacles to growth as their currencies become worth less by the hour.  In these situations, import prices soar, the price of domestic goods become unpredictable, investors pull out of the country, and the citizens cannot save because their money loses value every day.

Security for foreign and domestic investors

A relatively stable currency makes investors confident that the value of their investment will be preserved over time.

Investors trust in the value of the US dollar, and therefore, currently trust that the value of their investment in Timor-Leste next year will not be significantly different from the value of that investment this year. In fact, Heineken listed the U.S. dollar as one of the main attractions that led them to opening a plant in Timor-Leste. At least in the short-term, a Timorese national currency would discourage investment in Timor-Leste because it would make those investments relatively riskier.

Many commodities are bought and sold in U.S. dollars

Timor-Leste’s two biggest exports are oil and coffee, both of which are sold to the global market in US dollars. Therefore, using the US dollar partially insulates Timor-Leste’s economy from fluctuations in commodity prices.

The impact of the 2014 fall in oil prices on Timor-Leste’s economy was lessened because the country uses the U.S. dollar. During this time, the value of the US dollar appreciated relative to the Rupiah and other currencies, thereby reducing the cost of imported goods. As a result, the rate of inflation in Timor-Leste fell from 12% in 2013 to essentially zero in 2014.  Although the State received less money from its oil exports, prices that people had to pay for goods stopped increasing.

Challenges to using the U.S. dollar

Relinquish control over monetary policy

Monetary policy is a tool used by central banks to respond to different economic situations by adjusting a country’s money supply or interest rates. By using the U.S. dollar, Timor-Leste has given up its power to decide on monetary policy. Otherwise, the Central Bank could use such tools to stabilize the economy and help the country recover from external shocks.

If there are shocks to the economy, the Central Bank can devalue the currency to make exports more competitive, thereby offsetting some of the losses from the shock.

For example: Coffee is Timor-Leste’s largest non-oil export. Coffee production can be negatively impacted by external shocks such as poor weather conditions or widespread crop disease. In this case, the Central Bank could use monetary policy to devalue the currency, thereby making all Timorese goods relatively cheaper to foreign consumers. Therefore, the increased sales of other exports could make up for some of the decrease in the sales of coffee. However it is important to note that currently, Timor-Leste would not benefit much from using these types of monetary policy tools because we don’t yet have diverse exports.

Obstacle to diversification

The value of a Timorese national currency would be weaker than the U.S. dollar, making imported goods more expensive and local products relatively cheaper in comparison. Local products could compete with the relatively more expensive imported goods in the domestic market.  Subsequently, Timorese producers could sell more products, improve productivity and grow their production over time. As production and productivity increase, Timorese products would become more competitive on a global scale, thus expanding non-oil exports. This could be a tool to help Timor-Leste diversify its economy and encourage non-oil sector growth in the future.

The high value of the US dollar is part of the explanation for Timor-Leste’s import dependency because it allows Timor-Leste to import goods at a cheaper price than domestic producers can compete with. Replacing some imported goods with locally produced goods would begin to close the gap between imports and exports of non-oil goods, which will be an important step for economic sustainability as oil production ends and the Petroleum Fund is depleted over the next decade.

Is Timor-Leste ready?

 All of the speakers at the IOB seminar, including La’o Hamutuk, agreed that it is too soon for Timor-Leste to implement a national currency. Timor-Leste will implement a national currency in the future, but first must develop the non-oil sectors of the economy, which includes agriculture, tourism and light manufacturing. This is because implementing a national currency now would lead to an increase in the price of imported goods, thereby worsening people’s purchasing power while domestic production remains low. Additionally, monetary policy is not an effective policy tool without several different export sectors to adjust.

The productive sectors of non-oil GDP are agriculture and manufacturing, which have been stagnant since 2003. Government spending has driven nearly all the growth in non-oil GDP , and it will go down in coming years as oil revenues runs out and the Petroleum Fund balance declines.

After productive, non-oil sectors contribute significantly to the economy, Timor-Leste should consider adopting its own national currency.

Recommendations in the meantime

La’o Hamutuk recommends that policymakers take seriously the need to diversify the economy. There is an urgent need for proactive policies which encourage the sustainable growth of productive non-oil sectors.

One way that countries can boost local production and gradually substitute imports for domestic products is by introducing a combination of import tariffs and government subsidies for targeted sectors. These policies can protect our domestic industry as it develops the capacity to compete with imported products. Over time, as local production grows, Timor-Leste will be able to phase out tariffs and subsidies, as is required by a gradual compliance with the free trade requirements of ASEAN.

Timor-Leste’s people achieved national sovereignty after years of struggle and sacrifice, and it might seem that having a national currency is one of the benefits of that victory. However, we need to be sure that it also materially benefits the people of this country, especially the many who are not yet fully enjoying the economic benefits of independence.

Poténsia Indústria Ki’ik Prosesamentu Produtu Agríkola

Semináriu nasionál kona-ba Dezafiu no Poténsia Indústria Ki’ik Prosesamentu Produtu Agríkola iha Timor-Leste

Iha loron 22 Fevreiru 2018, La’o Hamutuk realiza semináriu nasionál ida iha Dili kona-ba dezafiu no poténsia indústria ki’ik prosesamentu produtu agríkola iha Timor-Leste. Semináriu ne’e nia objetivu maka atu hamosu espasu ba diskusaun entre ministériu relevante ho públiku kona-bá polítika, programa no estatutu dezenvolvimentu indústria ki’ik prosesamentu produtu agríkola iha rai laran. Oradór ba semináriu ne’e mai husi La’o Hamutuk, Ministériu Komérsiu no Indústria, Ministériu Agrikultura no Peska, no ONG Parcic. Iha kraik, bele hetan aprezentasaun sira husi Semináriu ne'e.

Tuir mai, pontus hodi loke aprezentasaun no diskusaun husi Mariano Ferreira, La’o Hamutuk:

• Iha 2017 La’o Hamutuk hahú peskiza ida kona-ba indústria kiak prosesamentu produtu agríkola nian iha Timor-Leste. Peskiza ida ne’e hala’o iha munisipiu haat: Ainaro, Bobonaro, Baucau no Covalima. Liu hosi peskiza ida ne’e La’o Hamutuk hakarak buka hatene Dezafiu no Poténsia ba Indústria Ki’ik Prosesamentu Produtu Agríkola nian iha Timor-Leste.
• Rezultadu husi peskiza ne’e hatudu katak iha ona indústria ki’ik prosesamentu produtu agríkola nian iha munisipiu haat ne’e, ne’ebé sira nia produtu sira fa’an ona iha loja ka supermerkadu.
• Produtu ne'ebé sira prodús mak hanesan: manteiga fore-rai, kripik ho variedade oin-oin, mina nuu virjen, rebusadu sukaer, tempe no tahu, guriguri gizi, cha herbal ho variedade oin-oin, foos rai, saus tomate, ikan tomate, marmelada ho variedade oin-oin, ikan tomate, fore-rai sona, sabaun, mina kamii, tintu hudi, no bani-been.
• Aleinde fa’an produtu ne'ebé sira prodús iha sira nia sentru produsaun, kios/loja balu iha sira nia munisipiu, sira mós fa’an iha supermerkadu sira iha Dili laran. Grupu prosesador sira fa’an sira nia produtu liu hosi NGO fasilitador sira. NGO fasilitador lori produtu sira ne’e ba fa’an iha sira nia fatin no iha supermerkadu sira. Iha mós grupu balun ne’ebé mak sira nia produtu ONG sira mak sosa.
• Supermerkadu sira en jerál nakloke atu simu produtu husi grupu prosesamentu nian. Kritéria prinsipál ne'ebé sira aplika maka kompatibilidade ho regulamentu Autoridade de Inspeção e Fiscalização da Atividade Económica, Sanitaria e Alimentar (AIFAESA) nian. Kritéria sira ne’e inklui kompozisaun produtu nian, data produsaun no mós data prazu nian.
• Maioria hosi grupu produtór sira ne’ebé partisipa iha estudu ida ne’e hatete katak sira la iha problema ho merkadu, maibé problema ho konsisténsia no volume produsaun. Produsaun dala barak la konsistente tanba depende mós ba matéria prima ne'ebé iha.
• Problema ho merkadu liga liu ba koñesimentu atu buka merkadu no meius atu transporta produtu ba merkadu Bainhira matéria prima laiha ka karun liu, sira labele halo produsaun hanesan baibain.
• Dezafiu kona ba volume produsaun liga ba ekipamentu produsaun ne'ebé sei limitadu, fatin produsaun ne'ebé ki’ik no mós merkadu nian ne'ebé ki’ik liu. Oras ne’e sira iha kapasidade atu prodús uitoan de’it no maioria atu ba fa’an de’it iha Dili.

Orador seluk fo aprezentasaun sira, no bele hetan husi:

• Ministru Komérsiu no Indústria, Sr. Antonio da Conceição
• Diretór Agro-comercio - Ministerio Agricultura no Peska, Eng. Fernando Egidio Amaral
• Diretóra Parcic, Sra. Junko Ito

Everyone welcome to celebrate Maritime Boundary Treaty

Liga ba blog ida ne'e iha Tetum

7:00 am, Wednesday 7 March
at La'o Hamutuk's office

As you probably know, the Maritime Boundary Treaty will be signed by Timor-Leste and Australia at UN Headquarters in New York on Tuesday 6 March at 5:00 pm, which is 7:00 am on Wednesday in Dili. La’o Hamutuk is organizing a small party to celebrate this signing, as a popular victory which many people have struggled for since before Timor-Leste restored its independence.

We invite everyone who supported this struggle to join us in celebration by sharing breakfast at La'o Hamutuk's office in Bebora.

Come together with pride and joy to celebrate this victory, which we knew would be difficult but never thought was impossible.  We won this 20-year struggle; our maritime boundary will follow the Median Line principle under international law. Although the government of Australia refused to recognize this right for many years, they finally recognized Timor-Leste's sovereign rights -- we won!

Once again, we invite all Timorese and international friends, as we all came together in the Movement Against the Occupation of the Timor Sea (MKOTT) to struggle for maritime boundaries, let us join in celebration of this victory of the Timorese people, solidarity activists and RDTL. 

Please bring coffee, traditional breakfast or other local food, to eat and drink together. La'o Hamutuk will show photos from our struggle, and we will have music and sing together.

Please share this information with other friends who might not see it. We greatly appreciate everyone's participation in this long struggle, and in this victory party.

Ema hotu bele mai festa ba Tratadu Fronteira Maritima

Link to this blog in English

Tuku hitu dadeer, loron 7 Fulan Marsu
iha La'o Hamutuk nia servisu-fatin

Nudár públiku hatene ona, tratadu ba Fronteira Maritima sei asina iha sede Nasoins Unidas entre Nasaun rua, Timor-Leste no Australia, dia 6 Marsu, tuku 1700 oras Nova Iorke USA, tempu hanesan iha Dili dia 7 kuarta feira tuku hitu dadeer.  La’o Hamutuk hakarak organiza festa ki’ik atu selebra asinatura ida ne’e, nudár vitória povu nian ne’ebé ema barak buka antes Timor-Leste hetan nia Independénsia.

Liu husi karta ida ne’e, ami konvite ita-boot sira hotu ne’ebé durante ne’e apoiu luta ida ne’e, atu mai hamutuk hodi ita selebra hamutuk hodi hemu kafé dadeer nian iha edifísiu La’o Hamutuk nia iha Bebora.

Mai hamutuk ho hanoin orgullu, kontente hamnasa hodi festeza buat ne’ebé ita sente todan maibé la sente imposivel. Ita manán duni ona iha luta ida ne’e, manán tanba ita iha ona liña fronteira Maritima tuir prinsipiu Liña Klaran tuir Lei Internasionál. Objetivu ida ne’ebé Governu Australia tempu naruk abandona, ohin loron ita nia luta konkista sira nia mudansa no atinje vitória final ba povu TL nia luta.

Dala ida tan, ami konvite kolega hotu Timor oan, nudár ita hotu hamutuk iha MKOTT ne’ebé Luta ba F.M, mai ita halo festa hamutuk ba vitória ne’ebé ita hetan ona nudár povu, ativista solidariedade no nudár estadu.

Kolega sira bele lori mai, kafé, ai-farina da’an, talas da’an, hudi, no ai han lokál seluk tan, hodi ita han no hemu hamutuk nudár maneira festa popular ida. La’o Hamutuk sei iha loke foto balun husi ita nia manifestasaun sira hodi ita hotu haree fali no sei iha múzika balun atu ita rona no kanta hamutuk.

Bele fahe mós informasaun ne’e ba kolega sira ne’ebé la konsege hetan husi konvite ida ne’e. Ba kolega sira nia atensaun no mai festa hamutuk, la haluha hato’o apresiasaun boot.