East Timor faces hit by carbon tax

David Wroe

April 26, 2012

The extra costs from the carbon tax will cut revenue from shared gas fields such as Bayu-Undan.

EAST Timor could be slugged millions of dollars a year under the carbon tax, which is set to take a bite out of revenues from offshore natural gas fields that Australia shares with the impoverished nation.

The tiny country, which relies heavily on revenues from fossil fuel deposits in the Timor Sea, has expressed concern after learning recently it would likely be financially disadvantaged under the tax.

The federal government has acknowledged it needs to strike a compromise with its neighbour as to how the carbon tax will apply to greenhouse emissions arising from gas production in the Joint Petroleum Development Area, though no discussions have yet taken place.

Advertisement: Story continues below

Alfredo Pires, East Timor's Secretary of State for Natural Resources, told The Age the development area meant ''a lot to our future'', and his country would not accept the unilateral application of Australian legislation.

''This is a very young country and on the other side we have a big country with a very advanced economy,'' he said. ''We like to have a very high standard of environmental requirements but at the end of the day we are a small country and I don't think our contribution to polluting the world is significant. There is a question of fairness in this, but then the whole question of the Timor Sea has a long history of what is fair and what is not.''

He said he was also concerned that rising costs could hurt investment. ''We are living in a very competitive world,'' he said.

Under the deal, the revenues from gas fields such as Bayu-Undan and about a fifth of Greater Sunrise are shared 90-10 between East Timor and Australia. The revenues are split after costs are deducted, including the percentages paid to the companies that extract the gas, notably ConocoPhillips, which operates Bayu-Undan and processes the piped gas in Darwin.

The extra costs imposed by the carbon price will cut the total proceeds. In Australia's case the government makes the money back because the carbon tax flows into its coffers.

How much it will pay is unclear and depends on future negotiations, though a source said the figure could be in the tens of millions of dollars.

Francisco da Costa Monteiro, president and CEO of Timor Gap, E. P., East Timor's state-owned oil and gas company, said the matter was ''a serious concern from the Timor-Leste side''.

''If it is $11 million or $1 million, from Timor Leste's perspective it is quite significant. We have a lot of schools to rebuild and healthcare facilities to put in place.''

 more: http://www.smh.com.au/opinion/political-news/east-timor-faces-hit-by-carbon-tax-20120425-1xlm8.html#ixzz1tIW3MkEM

A spokesman for the Climate Change Department said Australia would consult East Timor and ensure the carbon tax's application was consistent with international law.

Opposition climate spokesman Greg Hunt said the government appeared to have no understanding of the impacts of its own tax.

''One of the poorest nations in the world will now be hit for millions each year by the carbon tax,'' he said.

Who will be the Timor-Leste’s Next President in 2012 Election?

Josh Trindade

On the 16^th of April 2012, East Timorese will vote in the second-round of the presidential election where former General, Taur Matan Ruak (TMR), an independent candidate will compete against Fretilin candidate Lu –Ólo for the Head of State position in Timor-Leste. Both candidates made it to the second round where Lu-Ólo ran first place with 28.8% and TMR 25.7%. Local and international experts and observers predicted that the second round of the presidential election will be tough for both candidates.

The 2012 Timor-Leste election process itself has been described by international observers as free, fair and democratic. Unlike previous elections, the 2012 election has been surprisingly peaceful with minor incidents, but the number of voter turn-out was only 78% and dropped 6% compared to previous 2007 election figures. The main contributing factor to this is logistical reasons where the electoral law requires voters to go back and vote at their individual place of registration.

Taur Matan Ruak (TMR)

TMR and his campaign team are very optimistic to defeat the Fretilin candidate this time and their optimism is based on very good reasons - mainly because as an independent candidate, TMR not only has support from CNRT and other parties, but also they are harvesting most of the non-Fretilin voters from other candidates such as Ramos-Horta and Fernando Lasama of the Democratic Party (PD); both have 35% voters if combined and spreading across the Western and Middle regions of the country. Secondly, TMR has the advantage as an independent candidate that allows him to earn the trust from ordinary Timorese. TMR who likes cooking and reading in his free time is known to be well mannered, humble yet brave. His braveness often is misinterpreted by his opponents as aggression. His willingness to work and listen to others earned him a lot of admiration from those who work with him in his campaign team. One of his main campaign team member’s, Fidelis Magalahães, a young London School of Economics (LSE) graduate described TMR as, “… not a typical Timorese leader. In our meetings, sometimes he just listens and let us [the campaign team] talk and discuss the matter. He will ask questions and clarification if he is not sure about something. He likes his ideas to be challenged and appreciates those who produce new ideas. He will be a great president for Timor-Leste. It is great to work with him.”

Lu-Olo

Many Timorese like Lu-Ólo as an individual. He is a bright man and has experience to have served as speaker of parliament for 5 years. He also recently graduated with a law degree from Timor-Leste National University. Many view him as someone who is like ‘gold’ inside a lion’s mouth. The support he received from Fretilin seems like a good thing, but if one looks closer, it is a drawback at the same time. It is because Fretilin voters can only take him to the second round as the most voted candidate, but then that’s it. He cannot go further because the number of Fretilin voters goes as far as 30%, give or take 10%. For Lu-Ólo, the 2007 election scenario is likely to be repeated where he was the most voted candidate in the first round and lost against Ramos Horta, the current President in the second round. Lu-Ólo’s chances to be the next president can be easily predicted by looking at the 2007 election and the first round of that presidential election result. It is predicted that, Lu-Ólo will get 40% votes if everything run smoothly or 45% at most. Furthermore, the non-Fretilin afraid of people around Lu-Ólo and they worry that if he is elected as president, the remote control will be held by someone else. They also worry that Lu-Ólo cannot separate between party interests and national interest when he serves as president. This was very apparent when he was speaker of parliament.

Ramos Horta and Lasama’s votes will determine who will be the next President

Ramos Horta and Lasama will be the one’s who decide who will be the next president, and they know this very well. It is still a mystery whom they will support out of TMR and Lu-Ólo. This can swing either way. However, logically, they will support the candidate whom they think they can easily work with and have the same general views on how the country should move forward. In this case, personalities of different figures within Fretilin and CNRT become very important. Their decisions will be based on whether they think it is easier to work with TMR and Xanana Gusmão or Lu-Ólo and Mari Alkatiri. For Lasama, it is difficult to choose to work with the latter (Lu-Ólo and Alkatiri) because young PD rank and file members have been offended too often in the past when Mr. Alkatiri publicly labeled them as “sarjana supermi” - 5 minute noodle degrees from Indonesia. Ramos Horta can work with either one of them however with tendencies more towards TMR and Xanana because they have similar views on how the country should move forward. All being said for the nation’s interest, one would expect that whomever Ramos-Horta or Lasama give their votes to must also serve their own agenda’s.

What this election means to the Timorese?

For ordinary Timorese, the most important thing is not who will be the next president, but it is more about if the election process is carried out peacefully or not. If this election is peaceful (both presidential and parliamentary [in June this year]), it will be a milestone in Timorese history. A lot of efforts have been made by many Timorese to promote a peaceful election, free of violence. It is amazing and impressive to see the Timorese eagerness to show to the international community and change the view of “Timor-Leste as a post-conflict violent country.” If the election process run peacefully, it will become the foundation of national unity where national development and a bright future can take root. Ho Maromak nia tulun!

EAST TIMOR'S ROAD: TO RICHES OR RUIN?

By Aubrey Belford

BUSINESS & ECONOMICS | March 19, 2012

East Timor’s people are desperately poor but its government is swimming in cash. Is the country buying its way out of poverty, or into economic disaster?

The stretch of road along East Timor's north coast from Dili to Baucau and back is a dramatic, beautiful and terrifying mess. Heading east, the road clings to temperamental, undulating hills. Periodically, it plummets through mangroves and flooded rice fields, and then rises again through forest.

By motorbike in the daytime it's dangerous enough. Every curb holds the threat of a truck-sized pothole, a slick of mud or a deep pool of water. At night, in near total darkness, it becomes an obstacle course of goats, buffaloes, dogs, crabs and people, who suddenly shimmer out of the darkness like apparitions.

Gripping onto the handlebars, your eyeballs darting around for threats, there's small comfort to be gained from one fact: this is one of the country's better roads.

The government of East Timor, one of Asia's poorest countries, says this is all about to change. After years as a neglected Portuguese colony, a warzone under brutal Indonesian occupation, and then an aid-dependent ward of the international community, East Timor is standing on its own. The country is sitting on a well-performing USD9.3 billion sovereign wealth fund, made up of revenues flowing in from oil and gas in the Timor Gap, and is spending big. The country has budgeted more than USD1.67 billion to spend in 2012, a 28 per cent increase over the year before. The biggest chunk of it is on much-needed roads, electricity and other infrastructure.

The government of Prime Minister Xanana Gusmao says all this is part of an ambitious strategy to move the country from deep poverty, growing at or near double digits every year until it reaches a level pegging with some of Southeast Asia's more successful "upper middle income"countries by 2030.

It's also no coincidence that the country has just started a long season of elections - culminating in a parliamentary poll in June. If everything goes smoothly, a United Nations stabilisation mission and about 460 Australian and New Zealand troops should finally leave, after six years on the ground. The huge surge of cash has appeared, so far, to prevent the country falling into the sort of violence that has threatened to derail it in the recent past.

Politics has so far been peaceful, but still it has been raucous. President José Ramos-Horta was kicked out of office in the first round presidential voting on Saturday. The second round, later this year, will be a runoff between Francisco Guterres, from the opposition Fretilin Party, and Taur Matan Ruak, a former rebel commander and military chief, who was backed by Gusmao after the prime minister abandoned his earlier alliance with Ramos-Horta.

But as money sloshes into Dili, there also is growing concern that the country is falling into the same trap as legions of impoverished countries before it: too much resource money, far too quickly. Critics say the country is experiencing worrying signs of a wild binge - massive projects rushed through at ballooning costs, millions of dollars disappearing into administrative holes, the rise of a tiny, well-connected elite, and surging prices for everyday goods.

While both sides of politics accuse the other of pandering and waste, foreign analysts mostly agree that everyone in the political class shares part of the blame. And when the binge ends, Australia could end up with another basket case on its doorstep.

"Timor-Leste is in a bubble right now because they've got higher oil revenues, but they're already dropping and they're not going to last that long," says Charles Scheiner, a researcher at La'o Hamutuk, a Timorese watchdog nongovernmental organization (NGO). "And when the bubble breaks that's a very different reality to
what's happening at the moment."

With more than 90 per cent of government revenue coming from oil and gas, East Timor is the world's second most resource-dependent country, after the newly independent South Sudan, according to Scheiner. Most of that money is being spent on roads and electricity, in particular a massive national grid that has exploded in cost from an originally planned amount of less than USD400 million to more than double that. Inflation is 15.4 per cent (and 17.7 per cent in Dili), according to government figures. In 2010, East Timor imported nearly USD288 million in goods, and exported just USD16 million of coffee. Apart from some agricultural products and a smattering of handicrafts, almost nothing on sale is locally produced. Focusing too much on oil and gas, East Timor is also neglecting the future development of other industries, La'o Hamutuk argues.

The group also says East Timor is spending well beyond its means. Even on the most optimistic oil revenue projections - including from the Greater Sunrise field, which is yet to become a reality thanks to a dispute between the Timorese government and Australian company Woodside ­ East Timor can only afford to spend USD1.88 per person per day over the next 40 years, Scheiner says. Currently, he claims it's spending about double that.

If new sources of petroleum don't come online and the government keeps increasing spending at the same rate, East Timor will be unable to finance its budget in less than a decade, Scheiner argues. And then the problems will really bite. According to Scheiner, projections of double-digit growth are a "pipe dream". Right now, his best rough guess is that only about a hundred well-connected Timorese businessmen and women are making serious money, either in government procurement contracts or lines of business closely linked to servicing them. And the future looks similarly inequitable.

"It's what happens in most countries where you don't have enough resources to go around, rich people get armed guards and build walls around their houses and poor people starve," he says. "It's not a very pretty picture."

The rub is, East Timorese desperately need the money, and, particularly in an election year, they are clamouring for their share.

In the countryside, most people eke out a living in subsistence farming. Throughout the country, about half of all children under five are malnourished and 41 per cent of the population lives on less than the local poverty line of USD 0.88 a day. Much of the infrastructure dates from Portuguese and Indonesian times and is in terrible condition.

In Manatuto, a district on the road east of Dili, the spectacle of a 50-metre stretch of
road turned into a knee-deep, watery mire last week showed just how slapdash the flow of money is.

Standing with about two dozen others and watching as motorbikes, trucks full of voters and police four-wheel-drives struggled through the morass, Jorge da Cunha, a 38-year-old local, explained the asphalt was washed away here a year ago. No work had been done until heavy rains came down the night before, threatening to cut off much of the east of the country just when thousands of voters needed to head home to vote. And so an urgent order came from the local government: smash open the retaining wall, and let the water out.

"Our government has a big budget, but there's something wrong with implementing things," he said, taking a break from trying to smash a hole in the wall with a metal rod and a large rock; it's work he says he's doing with others in return for cigarette money. "We've got a big budget but small results."

Further along, in the district's main town, the complaints are the same. By the beach, near the shells of homes torched by pro-Indonesian militia after the 1999 UN-backed referendum that won East Timor its independence, men sit staring out at the sea. Natalino da Costa, a single, 28-year-old man who lives off farming and fishing, says life has barely improved, and work is sporadic.

Since December 2011, electricity has run 24 hours in town, but there has been little other benefit, da Costa says. The price of the fish he sells has stayed static, but the cost of goods at the market - a row of rusty, corrugated tin shanties - has shot up. Except for a few fruits and vegetables, everything - cooking oil, sugar, drinks, rice, candles - is imported, mostly from Indonesia, China and Vietnam. Market vendors here complain that another road from deeper in the countryside has been cut by a landslide, forcing people trying to get vegetables to market to stop on one side, cross the gap by foot, and load goods into waiting trucks and minibuses.

"If you ask me, they're misusing the money," da Costa says. "They're spreading it out but we're not satisfied. They really should be building houses here. That's what the people want."

It's this mix of dissatisfaction and demand that the government says it has to contend with.

Sitting in her office, the finance minister, Emilia Pires, acknowledges the government is spending its money quickly, but she argues that it has no real choice. In 2006, fighting among factions of the security forces killed 37 people, displaced more than 100,000 people, and raised the specter of national collapse. Over the years, the international community kicked in billions of dollars in aid, Pires says, with too few tangible results.

Now, with money to spend, the government

is buying stability. Pires can't remember off the top of her head how much the government has spent since taking office in 2007, so she gets on to her computer, looks up national expenditure figures on the government's transparency website, and adds them together using a pen and paper. The figure is about USD3.2 billion - enough, she says, to have already rescued East Timor from becoming a "failed state".

"As a finance person I used to think like that: black and white. It's not black and white. You are managing a country getting out of conflict. Do you realise what that means? Now, when you're giving electricity to the people, people are starting to move on. There'll be more participants in the economy because now anybody in Timbuktu can turn on some thing and start doing their little business," she says.

"So they're not sitting on the beachfront, doing nothing, waiting for someone to make trouble, so they go into trouble mode."

Pires's argument is this: Yes, expenses have blown out, but people are demanding change quickly, and that means paying contractors a premium. And without roads and electricity, no other parts of the economy can develop. She says criticisms of East Timor's oil and gas dependence are overblown - pointing to a draft national account on her desk, as yet unreleased, saying it only makes up 79 per cent of government revenue, as opposed to the more than 90 per cent figure used in La'o Hamutuk's analysis (Pires's says the account is only for 2010 - East Timor is still trying to play catch-up with its books.)

The minister also blames the Fretilin opposition for a big part of the splurge, after it raised objections in parliament to government plans to set up the national grid with second-hand Chinese generators. The cost explosion came when the government was pressured into buying expensive, brand new equipment from Finland.

"Parliament went berserk - mostly the opposition - wanting a brand new thing," she says. "Because they said that the other one is second-hand, nobody likes China, neh neh neh, all that stuff, which we thought was unreasonable but, hey, parliament overrules us."

That argument does not fly with the opposition. East Timor's electricity grid "has been a fucking nightmare. It's been a procurement disaster," says Jose Teixeira, a Fretilin Member of Parliament and adviser to Guterres.

"It's just your classic example of a country that is just so dumfounded full of money that people are just spending it because it's there, without taking the most fundamental bit of care about doing proper feasibility studies or without doing proper procurement, for that matter," he says.

The "resource curse" is a classic trap, and one East Timor was meant to avoid. Since its separation from Indonesia, East Timor has become a laboratory of sorts for the international development industry of NGOs, UN agencies, multilateral institutions and foreign advisers. For a decade, Dili has been a town of cafes and beach bars largely populated by foreigners on pay scales that range from the altruistic to the astronomical.

Putting the petroleum money away in a special sovereign wealth fund, modeled on Norway, has been the international community's favoured cure for the curse. The idea was to grow the money and spend slowly - and avoid corruption, inflation and maladministration.

But since the fund's establishment, East Timor's parliament has continually voted to scoop out far more than the original, conservative speed limit set for yearly withdrawals, only three percent of estimated future petroleum income. In order to get a better return to pay for this spending, parliament amended the law governing the fund last year to allow as much as half the fund to be moved from US dollar government bonds to riskier equities, from an earlier 90-10 split.


The international development world has, for the most part, been surprisingly quiet about the government's profligacy.

The reason for this is a question I ask around town, and I usually get the same answer: in these early days, at least, foreigners don't want to lose their access in a country that is becoming increasingly self-confident as it loses its reliance on foreign aid.

In one of Dili's popular expat cafes, Teixeira simply gestures to a Westerner at the next table, who he calls a "classic example" of a government adviser unwilling to give contrary advice to his employers. "They don't care. You know why they don't care? Because they're getting paid here more than they'd ever get paid in their own countries," Teixeira says.

The country chief of one prominent international NGO, who did not want to be named in order to maintain a good working relationship with the government, tells me a similar thing.

"For foreign advisers there's a symbiotic relationship, or cooptation," he says. And for most international organisations, "I think there's a certain amount of self-censorship here," he says. "To really step outside of that and call it like it is, is really difficult."

It's not that the government and international organisations have completely overlooked the risks that come with spending big on development. The country has recently set up, among other institutions, an anti-corruption commission and an agency for overseeing major infrastructure projects, the National Development Agency, or ADN.

Visiting the agency's office in the dark, winding corridors of Dili's colonial era Palácio do Governo at 8.30 in the morning is a shock: the staff are actually there, and working hard.

The director, Samuel Marçal, readily acknowledges East Timor's spending is "lavish" and that millions are disappearing into poorly planned projects or into the hands of shady contractors. He says his office saved the government about USD60 million last year by cancelling dodgy contracts. But, like Pires, he says infrastructure is badly needed, and that much of the cost has come because of the need for emergency repairs, particularly for roads and irrigation washed away by rains in 2010.

Those who say the government is falling victim to the resource curse "are criticising us but they're not thinking critically," he says. "On one [hand] they're saying 'Don't, don't, don't spend the money.' But then they're saying, 'The community is poor, they're lacking this and that.' And [it is] protests like that that force the government to fulfill them."

East Timor's road to development is proving messy, Marçal says. But that's just the way it has to be.

"We have to fall down, get up, fall down again," he says. "It's a process and everyone has to understand this."

Aubrey Belford has also been looking at the political road ahead for East Timor. Read East Timor's Test here.

Assessing the Numbers in Timor Leste's Election

Damien Kingsbury

Jose Ramos-Horta’s decision to support the Democratic Party (PD) in the parliamentary elections has two sets of implications for Timor-Leste’s politics. The first and most obvious will be the effect that this has on the outcome of the parliamentary elections and in particular the level of success of PD. The second, less obvious, implication will be for the next, second round of the presidential election, for which Ramos-Horta was unsuccessful.

Assuming that votes for candidates will be translated, more or less, into parliamentary votes, based on Ramos-Horta’s support, with his 18% added to PD’s 17%, PD can expect to receive around 35% of the vote which, extrapolating from first round presidential figures, is likely to make it Timor-Leste’s single largest party and hence in a dominant position to form a majority alliance in parliament.

The difficulty is, however, that while some parties closely extrapolate from presidential to parliamentary results, in the 2007 elections, PD did not. Indeed, the result for PD’s candidate, Fernando ‘Lasama’ de Araujo, of 19% in the 2007 presidential race slumped to 11.3% for PD in the parliamentary vote. There was, then, a very big question over whether PD could retain Lasama’s 2012 17% vote for the parliamentary election and, moreover, whether Ramos-Horta’s personal vote would hold when he was not a candidate.

If these votes cannot hold, then PD may end up as the junior partner in a parliamentary alliance or, less likely, it may be out of an alliance altogether. If these votes do hold up, then PD may be a, or the, dominant party.
The further question is if, in exchange for his support, Ramos-Horta would want to be appointed as prime minister. Under the Timor-Leste system, ministers can be appointed from outside parliament, with those appointed from within being replaced from their party’s electoral list.

Lasama would, however, probably be looking covetously upon the position of prime minister for himself, if adding Ramos-Horta’s support to PD was to produce a plurality in the parliament. This would then leave open the option of Ramos-Horta returning to his former position, between 2002-06, as Foreign Minister, which he undertook with considerable success. Having said this, Ramos-Horta may also be satisfied with the work he has done to date for Timor-Leste, spanning some 38 years, and move out of official life.

The question is, however, whether the 18% of the vote that was allocated to Ramos-Horta in the first presidential round would automatically flow to PD, even with Ramos-Horta’s endorsement. No doubt much of the vote he received was due to his personal standing as president. But as he will not be standing in the parliamentary election and party loyalties remain strong, it is less than certain that all of his vote will automatically flow to PD.

However, Ramos-Horta’s endorsement of PD does give the once student-based party a much stronger chance of doing well in the parliamentary elections and positions it, and Lasama, well for future contests.

More interesting, however, was Ramos-Horta’s neutrality over the issue of his successor as president. In this, he has refused to endorse either of the two candidates going through to the second round of the presidential election.

By endorsing PD in the parliamentary elections, however, Ramos-Horta may have more subtly indicated his support for whichever candidate PD chooses to support. At this stage, Lasama has not indicated whether he will throw PD’s support behind Fretilin’s Lu-Olo or the Xanana Gusmao-back Taur Matan Ruak. Lu-Olo received 28% of the vote which, if it is consistent with 2007, will probably also be reflected in Fretilin’s vote in the parliamentary elections. Ruak received 25% of the vote, which could reasonably be allocated to CNRT.

Despite occasional differences, PD enjoyed five years in government as a parliamentary alliance partner with Gusmao’s CNRT, with Lasama occupying the position of parliamentary president (speaker or chair) with the support of CNRT founder and later prime minister, Xanana Gusmao. The two are generally understood to have had a close alliance and Lasama will need a strong incentive to beak it.

If Lasama remains neutral - which still might only be a superficial neutrality - much of PD’s support can be expected to go to Ruak, given the party’s traditional antipathy towards Fretilin. If he supports Ruak, that flow of support would be almost complete and, with Ramos-Horta’s support for PD, potentially be enough to create a CNRT-PD government. Having said that, such a government would probably try to pick up extra parliamentary support from minor parties, to increase their buffer over a Fretilin-led opposition.

However, if Lasama was to break with his own political past and endorse Lu-Olo, it is reasonable to expect PD’s presidential vote would split. A split vote would favour Lu-Olo, having already secured the support of a couple of minor parties, and potentially be enough to push him over the 50% line.

The question would be, then, where support for Ramos-Horta was allocated. Had Ramos-Horta not indicated any political preference for the parliamentary outcome, it is likely his vote would have been fairly evenly divided between the two candidates.

Added to PD supporters’ traditional antipathy towards Fretilin, this would have resulted in Ruak picking up votes to close the gap on Lu-Olo’s three per cent lead and, probably, passing it. If, however, Lasama does opt in favour of a particular candidate and most of Ramos-Horta’s support follows, this could be expected to be the decisive moment that determines the presidential outcome, either Ruak will carry most of the non-Fretilin vote and be comfortably elected, or the first round non-Fretilin vote will be split, making it a close contest for the presidency.

How the political parties line up on the issue of the presidency will also indicate how the parliamentary election and consequent alliances to form government is likely to unfold.

Professor Damien Kingsbury
Director, Centre for Citizenship, Development and Human Rights
Faculty of Arts and Education
Deakin University, Melbourne
+61(0)439638834
___________________

What Australia doesn't want East Timor to know

PAT WALSH APRIL 04, 2012

On 20 March, Attorney-General Nicola Roxon agreed to a Department of Foreign Affairs request to block public access to 34-year-old cables on the famine that ravaged East Timor early in the Indonesian occupation. Roxon reportedly believes that release of the material would prejudice Australia's international relations.

Given that Suharto and his regime have gone and that many other sensitive cables on the Timor question have been released over the last 12 years without damaging Australia's external relations, the decision is puzzling.

As someone who has spent many years working with both East Timorese and Indonesians to understand their shared history, I would argue that rather than cause for concern, the release of the cables would be generally welcomed in both countries as part of the free flow of ideas and information that both now enjoy.

Australia, as one of few witnesses to these events, should contribute what it knows so that these dark times are better understood and learned from in East Timor, Indonesia, Australia and elsewhere.

The famine of 1977–79 cut a swathe through East Timor's civilian population like the third horseman of the Apocalyse. Having failed to subdue the Timorese, the Indonesian military opted to starve them out. In addition to destroying food sources, forcing the population to flee and abandon gardens, the military also blocked international agencies from delivering aid until the army had achieved its military objectives.

When the US Catholic Relief Services was permitted to survey the situation in May 1979, its representative found conditions as critical as anything he had encountered during his 14 years experience in Asia. The famine, he reported, was not only claiming the very young and very old; many in their prime were also dying.

Most of the over 100,000 civilian deaths in East Timor during the 24 year war occurred at this time.

The significance of the famine to the Timorese was brought home in the course of the Commission for Reception, Truth and Reconciliation's (CAVR) inquiry conducted after independence. Witnesses explained that Timor was no stranger to malnutrition, seasonal hunger or other tragedies, but this was the mother of all catastrophes. Whole families and communities were wiped out by starvation.

'In August 1977 in Idada we buried 80 bodies in one day,' Manuel Carceres da Costa told CAVR. 'They died of starvation. They died with swollen and aching stomachs, unable to walk.'

Maria Jose da Costa's account was reminiscent of a 1950s rabbit drive in Australia: the military sprayed the long grass with gasoline and set fire to it to drive people out. Unable to run due to hunger, the elderly were left behind and died where they sat, defiant and dignified, dressed, she said, as if they were going to Sunday mass.

The famine dwarfs the Santa Cruz massacre and similar atrocities in scale and significance but is far less well known or analysed. This information gap is principally due to restrictions on access to East Timor applied by the Indonesian military until 1989. As a result most Indonesians are not only ignorant of what happened but continue to believe the Suharto regime's claims that the military was doing good work in East Timor.

Knowledge of what really happened is therefore an important corrective. It will help Indonesians understand why East Timor chose to separate from Indonesia in 1999 and why civilian control of the military is critical.

The period is also a blind spot internationally. Journalists continue to attribute the death-toll in East Timor to shooting and bombing rather than starvation, and researchers are unaware of the famine.

Cormac Ó Gráda, an Irish expert on famine, makes no mention of East Timor in his 2009 study Famine, A Short History, though he provides analysis and lessons from totalitarian famines of the 20th century in Stalin's USSR and Mao Tse-tung's China. Likewise Thomas Kenneally's book Three Famines: Starvation and Politics does not include the famine that occurred on Australia's doorstep though it illustrates his thesis.

East Timorese want to know more about the events that forced them to abandon families and have left them troubled because remains cannot be found for reburial according to custom. They also want to know why a crime of this magnitude has not been accounted for.

Australia can help them because it was a witness and what it saw is presumably contained in official cables from the time. Australia's ambassador to Indonesia was one of 11 diplomats to visit the territory in September 1978. Shocked at what he saw, he joined colleagues from Canada, Japan and the US to call for urgent relief. Assistance did not arrive until 12 months later, too late for many thousands of innocent people.

It will be hard to look an affected Timorese family in the eye today and explain why, over 30 years later, Australia does not want them to know what it knows about this catastrophe.

---

---

Pat Walsh has returned to Australia after working for ten years in East Timor, mostly as part of the Commission for Reception, Truth and Reconcilation. The UN recruited him to help establish the Commission and he served variously as its executive director and special adviser. Following the Commission's dissolution in 2005 he served as senior adviser to the Post-CAVR Technical Secretariat.

East Timor's Future Without Gusmao

By Tim Anderson

East Timorese PM Xanana Gusmao looks likely to lose government to Fretilin in June. Gusmao's mixed legacy proves that a great resistance leader does not necessarily make a great nation builder, writes Tim Anderson

There are signs that East Timor will soon have not only a new President but also a new government, one that will not include current Prime Minister Xanana Gusmao.

The electorate’s focus is now on the second round Presidential elections, due on 16 April. However the new government will be further shaped by the June parliamentary elections. That government will have a series of challenges, not least from the five year legacy of Gusmao’s government.

The Presidential second round is beginning to favour the Fretilin candidate, Francisco "Lu Olo" Guterres (28.8 per cent in the first round). Most of the Timorese Social Democratic Association (ASDT) and former Fretilin Minister Rogerio Lobato (who ran fifth with 3.5 per cent) now back Lu Olo. The three female first round candidates, plus Lurdes Bessa, the Vice-President of the Democratic Party (PD), now also back Lu Olo.

On the other side, important allies of Gusmao, who backs former army general Taur Matan Ruak (25.7 per cent in the first round), have the current Prime Minister at arm’s length. Third and fourth place-getters, President Jose Ramos Horta, PD leader (and Parliamentary President) Fernando "Lasama" de Araújo, and Social Democratic Party (PSD) President (and Gusmao’s Foreign Minister) Zacarias Albano da Costa have all called on their supporters to exercise a "conscience vote". All this does not bode well for Taur Matan Ruak or for Gusmao.

Horta has also made some comments against Taur’s campaign (over the use of military uniforms and intimidation), indicating he favours Lu Olo. Some suggest Horta wants to block a second Gusmao term.

Whoever wins the presidency, the most likely parliamentary outcome is a Fretilin-led coalition. Fretilin has always been the largest party in Timor. The only reason they were excluded from government in 2007 was that Gusmao managed to unify other groups against them. Since then, Fretilin’s discipline has held up and the anti-Fretilin coalition has collapsed after bitter recriminations within the Gusmao-dominated government. A number of Gusmao’s former allies would now work with Fretilin.

The collaboration announced between President Horta and the Democratic Party (PD) President Fernando "Lasama" de Araújo (third and fourth in the Presidential first round) does not signify a party block larger than Fretilin, even though their combined vote was 36 per cent.

Both men are well known and enjoy personal support, but that will not translate directly into parliamentary votes for the PD. Horta’s supporters come from a wider group, while Lasama’s personal vote in the 2007 Presidential elections was considerably higher than the PD vote that year. On the other hand, the Fretilin parliamentary vote is likely to be higher than Lu Olo’s personal vote, as it was in 2007. Nevertheless, Horta’s backing for the PD might mean that some of them would become candidates for inclusion in a Fretilin-led coalition.

Potential leaders of the new government are former Prime Ministers Mari Alkatiri and Estanislau Da Silva and former Deputy Prime Minister and Health Minister Dr Rui Araujo, who has worked with Fretilin for some time, but only recently joined the party.

It seems a change in government may be coming. So what legacy will Gusmao leave, and what are the key challenges for the new government?

Much has changed since independence. Most obviously, annual budgets have increased ten-fold, with incoming petroleum and gas revenue. Many of the basic elements of constitutional government are firmly in place. Yet there has been squandering of much of the new revenue, an escalation in corruption and waste, and failures to invest in the key sectors of education, health and agriculture.

Gusmao’s legacy includes a series of economic liberal measures, a culture of corruption and weak capacity building. An elite culture was nurtured, where large "packets" of private contracts were distributed, combining infrastructure development with "economic stimulus". This "big money" approach approved of by economic liberals such as former World Bank official Jeffery Sachs, did little to build institutional or human capacity. In many cases the infrastructure outcomes were seriously deficient. Any new government has to face the reaction of those elite groups if and when the tap is turned off.

Gusmao’s coalition government has had little policy coherence, in part due to internal conflicts. Follow through on important programs suffered. The national literacy program, started by the Fretilin-led government, was neglected. The important health program with Cuba was maintained, but there was little investment in the new faculty of medicine. Hundreds of students arrived back from Cuba over 2011-12 to find very limited general development of the national health system. Investment in schools and the national university was similarly limited.

Timor’s 2006 political crisis damaged agricultural programs and capacity and, as a result, domestic farm production in face of the 2008 global food crisis was weak. Import-dependent food programs were needed, but these too became a target of corrupt dealings. Support for small farming, which employs around 70 per cent of the population and forms the basis of future sustainable food supply, had never been high. Under Gusmao’s government it fell from 5 per cent to less than 3 per cent of the state budget.

At the same time, there were several attempts to lease out land to foreign owned agro-industry and bio-fuel companies. Most of these projects did not go ahead. The parliament did change the Petroleum Fund law, removing many of the prudential controls on the country’s main financial asset. Up to half that fund might now move offshore (even before the parliamentary elections) into the less accountable hands of external fund managers. And while the state budget became more dependent on petroleum revenues, the abolition of several classes of taxes restricted government options for raising alternative revenues. The tax base is very narrow.

Altogether this is not a pretty developmental picture for a country which had the advantages of relative stability, economic growth and substantial state revenues. One of the key lessons from Gusmao’s government may be that a great resistance leader does not necessarily make a great nation builder.

Assuming that the new government will not be led by Gusmao, the first step would be to develop and chart a new development strategy.

A key priority must be the approach to education, training and general human capacity building. Gusmao’s SDP did in fact have ambitious school completion objectives, but lacked the means to achieve them. State budget allocation to education fell from 15 per cent in 2005 to 10.2 per cent in 2010. Fourteen developing countries spend more than 25 per cent of their state budgets on education, and hardly any of these have the population growth rates of East Timor.

Similarly, public spending on health fell from 12 per cent of the state budget in 2005 to less than 6 per cent in 2010. That is, a strong decline in commitment to public investment in health, alongside the most rapidly expanding body of doctors in the world, thanks to the Cuban training program. The development monitoring body La’o Hamutuk points out that commitment to education and health shrank even further in the 2011 budget, to "less than a fifth as much as [the] physical infrastructure contracts with foreign companies".

Another priority area must be agriculture and food security. The Gusmao government’s attempt to push into new export cash crops was counterproductive, in a country with limited arable land, food import dependence and a history of food crises. Some of the worst, recent Millennium Development Goal (MDG) outcomes were in child malnutrition. This Achilles heel in Timor undermines progress in health and education alike.

At the root of it are failures in rural development. A lot of attention is paid to Dili, but the fact is that most of the country’s population is rural based. Further, the only sustainable food security solution lies in strong support for a small farming sector. In this regard Timor may have more to learn from the Japanese than from big agricultural exporters like Australia.

Yet another important challenge is how to manage the diverse army of foreign aid bodies or "development partners" in the country. The long term impact of the dual economies, inflation and outright racial discrimination from such regimes can be seen in cities such as Luanda, N’Djamena and Port Moresby: among the most expensive and unequal cities on earth.

Yet East Timor still has the capacity to develop that combination of a strong state and levels of participation which seem essential for successful development. Its national identity, sense of history and social conscience all remain strong. Despite all the recent problems, we can still expect remarkable things from this small country.