East Timor: Why The Economy is Key (Report/Blog)

By Andrew Thomas

Photo by Andrew Thomas

I never thought I would stand in a battery-chicken farm and think, what impressive progress!. 

But however unpleasant for the birds - cooped up, two to a shoe-box sized wire cage - its owners show off the Railaco farm with pride.

Its eggs are replacing ones that would otherwise have been brought in from abroad; it employs people and operates for profit. It is an East Timorese business success story.

They are becoming more common. Tony Jape - East Timorese but of Chinese descent and fresh from a fortune made as an émigré in Australia - is building the country’s first ever shopping centre.

Though still not quite finished, it is, he says, already 60 per cent let. And Timor Corp - one of the country’s two big coffee producers - is proud it exports beans right around the world.

These are little examples of a country whose economy is flying: a poor place, recently ravaged by conflict, it now has one of the fastest growing economies in the world.

But the pace of growth is controversial. Examples of private enterprise are the exceptions, not the rule.

The boom is mainly publicly funded, and is only possible because of big oil and gas reserves. A government that had a budget of just $68m in 2002 has $1.3bn to lavish this year.

Having spent a decade being frugal - building up $9bn in the national bank account - they’re now beginning to spend, spend, spend.

There are two motivations.

First, the still-pressing needs of the country. Half the children in East Timor are undersize because they are malnourished; diarrhea remains a big killer.

And in most rural provinces, running water and power are rare.

So, tapping into the fund, Xanana Gusmao, the prime minster, has started the biggest single development project in East Timor’s history: bringing electricity to all.

The second motivation is that the money sitting in the bank or invested in questionable assets is no longer growing at rates it once was.

As President Ramos-Horta told me, “It would be silly - silly - to keep the money in US treasury bonds. The dollar is depreciating fast. We are losing money. And President Obama, members of the US congress, they do not even know that we are contributing to pay for the US debt.

“So it is absolutely ridiculous that we would keep the money in US treasury bonds, paying us 2-3 per cent; once you deduct inflation, depreciation of the dollar, we are losing!”

I have just spent 10 days in East Timor, in advance of elections next year and the tenth anniversary of independence.

I was making four reports for Al Jazeera which, together paint a picture of the state of the tiny nation.

Ostensibly, each report stands alone:

1- One about whether there should be justice or an amnesty for those indicted by the UN for their part in 1999’s violence;

2- Another about the wisdom of spending down the oil fund;

3- A third about the threat to the marine environment as the country matures and;

4- A fourth looking about the extent to which foreign aid has been well-spent.

All the reports, though, have the theme of rapid development at their heart. Should a friendly economic relationship with Indonesia be prioritised above justice?

What will happen when the oil and gas and their revenues run out? Are damaged coral reefs a price worth paying for power? Can a country that has relied on foreign aid for a decade, now truly stand on its own two feet?

Peace has been a struggle for East Timor. There was a relapse of violence in 2006 and the president was shot in 2008.

Today, the country is entirely peaceful, and a very relaxed place to visit. That, though, could change. Keeping the economy on the straight and narrow is key to ensuring it does not.

Originally published by Al Jazeera on July 27, 2011 under Creative Commons Licensing