LH to PN: 2012 Budget proves the Resource Curse is here

Timor-Leste Parliament's Committee C (Economy) held a hearing on the proposed 2012 State Budget last Friday, with testimony from La'o Hamutuk and other NGOs.
(L-R around table: MPs Manuel Tilman, Aderito Hugo da Costa and Cipriana Pereira. Guteriano Neves, Alexandra Arnassalon, Charles Scheiner and Juvinal Dias from La'o Hamutuk.)

We presented a 16-page submission (full text in Tetum and English) with the following main points:

The Resource Curse is truly here.

• The “Dutch disease” of inflation, currently over 13%, exacerbates poverty in Timor-Leste.
• We continue to neglect non-oil development and depend on imports.
• Our people are our most important resource, but the budget will cut the share for health and education while infrastructure mega-projects get most of the money.
• The MDG-Suco program exemplifies careless budget practices.

We should learn from Timor-Leste’s past experiences.

• Timor-Leste is a world leader in budget escalation, with a 407% four-year increase second only to Zimbabwe.
• The budget will spend 7.2% of our petroleum wealth from the Petroleum Fund, more than double the Estimated Sustainable Income. By 2014, Petroleum Fund withdrawals will be larger than oil revenues deposited into the Fund.
• Special Funds continue to erode Parliamentary authority, and the Budget documents are not accurate or complete about how the Infrastructure Fund is being used.
• Parliament needs complete information on expected project costs, such as the $950 million national electricity project, the $1.4 billion south coast highway, and other elements of the Tasi Mane petroleum infrastructure project.
• Electricity continues to dominate, receiving more than $370 million, with results lower than expectations.
• Agriculture deserves more than 1% of the budget, since it is the livelihood of more than 80% of our population.

Some new developments give more reason for concern.

• Parliament needs more information before approving borrowing. This budget is the first request to authorize loans, $33 million, but future loans will be much larger.
• The Tasi Mane project could be a multi-billion-dollar white elephant.
• The South Coast Highway will eat up another billion or more.
• The Timor-Leste Investment Company gets $200 million, which may be squandered on futile, useless, money-losing projects.

Our submission included 21 recommendations for Timor-Leste's Parliament:

Highway dreams -- and their costs

For the last few years, La’o Hamutuk reported on the most expensive Government project in Timor-Leste’s history. The ill-conceived, poorly-planned, mismanaged and badly implemented national electricity project includes two heavy oil power plants and a high voltage grid. Even if there are no more cost overruns, this project will cost Timor-Leste more than $950 million dollars to construct ($443 million has already been spent) – plus hundreds of millions more for fuel, operation and maintenance.

Timorese policy-makers think big, and the electricity mega-project is about to be eclipsed by the South Coast Highway between Suai and Beacu, part of the Tasi Mane petroleum infrastructure corridor. Cars and 10-ton trucks will speed along its two carriageways at 100 km/hour, completing the 152-km trip in less than two hours.

Timor-Leste paid PT Virama Karya nearly a million dollars for a “Preliminary, Detailed Design and Environmental, Social and Economic Assessment” of this road, which was done in association with Multi Arch, LDA. A few weeks ago, the consultants presented their 75-volume report to the Government.  They estimate construction costs at $9.2 million per kilometer (about 20% less than similar roads in Indonesia) for a total outlay of $1.39 billion.

The proposed 2012 State Budget describes some of the expenditures for this project, although we believe they are understated (see table at right). This total, $767 million, is about half of what Virama Karya says the road will cost. If may be intended to pay for just a single carriageway, as the Strategic Development Plan suggests that the lanes may be built one at a time.

La’o Hamutuk estimates that the total cost of the road during its 30-year life (including construction, loan interest, and maintenance) will be $1 billion for a single-carriageway road, and $1.7 billion if both carriageways are built. 

Today, traffic along this route is less than 100 cars and trucks each day. If we optimistically assume tremendous growth due to the Tasi Mane project, this could increase by a factor of ten, to 1,000 per day. If the Virama Karya design is built and partly financed with concessional loans, each car or truck driving the length of the highway will benefit from a state subsidy of $156, more than a dollar per vehicle-kilometer. (Even if only one carriageway is built, Timor-Leste will have paid 60c for each vehicle-kilometer travelled, or $91 for a car which drives its length.)

One way to recover some of this money would be to charge tolls on this highway, although this seems unlikely given the Government’s decisions to reduce fuel and import taxes and to subsidize electricity users. If motorists paid tolls about the same as are charged in Indonesia (about 4¢/km for cars and 12¢/km for trucks), the state could recoup about 10% of its outlay.

The money which will be spent on this highway – more than $1,000 for each Timorese citizen and more than two years of our non-oil GDP – could do a lot for the education and health of our people, building human resources which could sustain Timor-Leste for generations. Petroleum revenues enable the “resource curse,” and petroleum-fueled vehicles justify an "Easy Street" for spending them.

Key issues in the 2012 State Budget

This page is condensed from a fuller discussion on La’o Hamutuk’s website, which links to the budget documents and includes more information and graphics. 
On 21 October, La'o Hamutuk presented a submission on the State Budget to Parliament's economics committee.

Last week, Timor-Leste’s Government presented Parliament with a proposal to spend $1.76 billion during 2012, including $1.56 from the Petroleum Fund and $33 million in foreign loans.Timor-Leste's proposed 2012 budget is 35% larger than 2011, and is more than five times as large as the 2008 budget proposed four years ago. According to the IMF, Zimbabwe (with runaway inflation) is the only country in the world whose state budget grew faster during this time; Congo (DRC) places third with an increase of 3½ times.

The budget violates the principles of sustainable use of the Petroleum Fund, although it explains that Bayu-Undan oil and gas production is declining. The projected 2013 budget will spend as much from the fund as oil revenues will bring in.This year's Estimated Sustainable Income (ESI) is $665 million. This is $69 million lower than last year's, because the Government overspent the ESI during 2011 and because ConocoPhillips expects higher Bayu-Undan operating costs and lower future production. However, every state budget since 2009 has broken the 3% sustainable spending rule, which has more to do with public relations than with policy.

The proposed budget includes $33 million in loans for water and roads during 2012, with more in future years. This is the first time the Government has asked Parliament to approve borrowing.  The budget proposal "does not show repayment because most of the loans have a ten year grace period."  Over the next four years, the budget anticipates borrowing $447 million dollars. This is a small fraction of what will probably be needed to implement the Strategic Development Plan, but full information is not given. We urge the Government to provide information on the full costs of mega-projects like the Suai-Beacu highway before Parliament approves the budget and the loans, rather than repeating the mistakes of the Heavy Oil project.

In the 2012 budget, capital expenditures for electricity are $282 million (down from $447 million in 2011), although the new power plants require more money for generator fuel, from $46 to $89 million. Notwithstanding the increases in generating capacity and prepaid meter installations, EDTL gross revenues only to go up a little, from $14.5 to $16.1 million, requiring a $73 million subsidy (not including hundreds of millions in capital costs).

The Infrastructure Fund allocates $163 million to the Tasi Mane south coast petroleum infrastructure project. More than half of this is to build the Suai supply base for offshore oil operations, which is budgeted at $329 million between 2011 and 2014. The Government has just appointed Eastlog Holdings PTE to construct the supply base, which will become the property of the new TimorGAP national oil company. Another $45 million is allocated during 2011 for the Suai-Beacu highway, which is budgeted to absorb $547 from the Infrastructure Fund and $220 million in loans between now and 2016.

Timor-Leste 2012 State Budget continues to neglect Timor-Leste's human resources essential to economic development and quality of life. Only 6.3% of state expenditures will go for education, and only 2.9% for health. UNDP recently pointed out that countries making progress toward the MDGs spend about 28% of their budgets on education and health, concluding that “not enough priority is being accorded to education and health. If Timor-Leste is to move faster in achieving the MDGs in these areas, then the share of social services in the budget will have to be virtually doubled.” The 2012 budget moves in the opposite direction, reducing the budget allocation for these social services from 9.6% of the 2011 budget to 9.2% for 2012.

The Decree-Law establishing a state-owned investment company went into force two weeks ago, and the Timor-Leste Investment Company (CITL) will be capitalized with $200 million from the 2012 State Budget. CITL is intended "promote the development of investment opportunities and national wealth growth, leading important strategic projects with significant commercial impact." Like Singapore’s Temasek, “CITL is a state owned enterprise with profit seeking objectives. It is owned by the Government but functions on a commercial basis." CITL is empowered to incur debt by issuing bonds; it can also purchase shares in other companies.

Orsamentu Estadu 2012 loke inovasaun

Iha loron 21 Outubro, La'o Hamutuk hato'o submisaun kona ba OJE2012 ba Parlamentu Nasional.

Orsamentu Jeral Estadu ba tinan eleisaun 2012 nian haksoit sai maka’as liu 35% ba orsamentu estadu 2011  ne’ebe maka’as mos. Proposta orsamentu biliaun $1.76 ne’e inklui imprestimus kiik primeira vez ba Timor-Leste. Mayor parte rendimentu ba orsamentu ne’e mai husi  Fundu Petroleu ho montante biliaun $1.59, maske estimasaun Governu ba rendimentu sustentavel ne’ebe atu foti husi Fundu Petroleu iha biliaun $0.67 deit.

Governu aprezenta orsamentu ba Parlamentu iha Sesta-Feira semana kotuk, hodi hadiak pratika pasadu, hodi publika tiha ona iha website Ministeriu Finansas. Ami rona katak ida ne’e akontese tamba iha preokupasaun katak website La’o Hamutuk bele sai tan fontes de facto ba Orsamentu Estadu. Ami sente orgulhu hodi partisipa iha kompetisaun ida ne’e, no publika ona tan dokumentus orsamentu nian ida ne’ebe fasil atu bele asesu ba iha pajina web la’o Hamutuk nian kona-ba orsamentu estadu 2012 (mos iha Ingles), ne’ebe sei inklui analiza no komentariu durante iha semana balun oin mai.

2012 Budget breaks new ground

Soaring 35% above the already huge Timor-Leste State Budget for 2011, the proposed $1.76 billion State Budget for election year 2012 includes a little borrowing for the first time. The bulk of its revenue, $1.59 billion, comes from the Petroleum Fund, notwithstanding the Government's estimate of the sustainable withdrawal (ESI) from the fund at only $0.67 billion.

The Government presented the budget to Parliament last Friday and, in an improvement over past practice, has already posted the budget documents on the Ministry of Finance website. We have heard that this welcome increase in transparency is because they feared that La'o Hamutuk's website would again become the de facto budget source. We're honored to participate in that competition, and have posted the budget documents in a more accessible form to La'o Hamutuk's page on the 2012 budget (also Tetum), which will include analysis and commentary over the next few weeks.

On 7 October, we blogged a summary of some key issues in this budget.

Ativista justisa sei vizita TL husi Arjentina

Telespetadór sira televizaun nian sei iha biban hodi aprende kona-ba susesu kampañia justisa ba krime sira hasoru umanidade nian.

TVTL sei hatudu filme El Cerco (Serku) kona-ba Patricia Isasa ninia kampañia ba justisa iha Arjentina iha Domingo, 09 Outubru, tuku 08:30 kalan. [Ami husi deskulpa tanba TVTL la tuir sira nia promete atu hatudu filme iha loron 1 Outubro.]  Filme ne’e iha dalen Español ho subtítulu iha dalen Inglés no Tetun.

Patricia Isasa nu’udar organizadora  estudante ho tinan 16 iha Santa Fé, Arjentina, bainhira polisia no soldadu sira kaer na’ok nia no tortura, no hatama nia ba prizaun la prosesu durante tinan rua ho balun iha ida hosi sentru sira detensaun no tortura klandestina 585 ne’ebé harii durante tempu ditadura. Depois batalla legál hodi lori ninia torturadór sira ba justisa, ema na’in neen hosi sira ne’ebé tortura nia simu sentensa ho tinan naruk iha prizaun iha tinan 2009. Sira balun nu’udar majór no juís durante dekada tolu entre bainhira sira komete krime no bainhira hetan justisa.

La’o Hamutuk organiza hatudu filme ida ne’e ba preparasaun vizita Patricia Isasa nian mai Timor-Leste iha Outubru, ne’ebé sei inklui ko’alia haleu nasaun ka enkontru ho komunidade no eventu balun iha Dili. Sra. Isasa sei fahe ninia esperiénsia kona-ba ninia susesu luta ba hakotu impuniade iha Arjentina liuhosi lori perpetradór sira krime sériu nian ba julgamentu no preizaun. Ninia esperiénsia sei fó esperansa no motivasaun ba ema Timoran sira ne’ebé kontinua sofre hosi klima impunidade ne’ebé iha daudaun ba krime sira hasoru umanidade ne’ebé komete durante tinan 24 nia laran hosi okupasaun Indonézia iha Timor-Leste.

Hakarak informasaun tan, ka atu organiza hatudu filme ne’e ka hasoru malu ho Sra. Patricia Isasa, favor ida kontaktu Jose Pereira iha La’o Hamutuk: jose@laohamutuk.org ka 3321040 ka 736-7518.

Argentina justice activist to visit Timor-Leste

Timor-Leste television viewers will have an opportunity to learn about a successful campaign for justice for crimes against humanity.

TVTL will broadcast the film El Cerco (The Circle) about Patricia Isasa's work for justice in Argentina on Sunday, 9 October, at 8:30 pm. The film is in Spanish with English and Tetum subtitles. [We apologize that TVTL did not broadcast the film on 1 October, as they had promised.]


Patricia Isasa was a 16-year-old student union organizer in 1976 in Santa Fe, Argentina, when she was kidnapped by police and soldiers and tortured and held prisoner without trial for two-and-a-half years at one of the 585 clandestine detention and torture centers set up during the dictatorship. After a long legal battle to bring her torturers to justice, six of the people who tortured her were  sentenced to decades in prison in 2009. Some of them had become mayor and judges during the three decades between when they committed their crimes and when justice was finally achieved.

La'o Hamutuk has arranged for this broadcast in preparation for Patricia Isasa's visit to Timor-Leste later in October, which will include a speaking tour around the country and several events in Dili.  Ms. Isasa will share experiences of her successful struggle to achieve accountability in Argentina by bringing perpetrators of serious crimes to trial and prison.  Her victory gives hope and motivation to Timor-Leste's people who continue to suffer from the ongoing impunity for crimes against humanity committed during 24 years of Indonesian occupation of Timor-Leste.

For more information, or to arrange a showing of the film or a meeting with Patricia Isasa, please contact Jose Pereira at La'o Hamutuk: jose@laohamutuk.org or 3321040 or 7367518.