08 March 2013

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

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.

1 comment:

  1. As usual, great work from Lao Hamutuk.

    However, what about the fact that the vast number of contracts being awarded to people on the basis of veterans' cred as opposed to business cred?

    Whilst not spending directed to veterans as a group or issue, its still spending being used to service the veterans PAC.