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Basics in East Timor allowed slip as oil wealth poured away

The Australian - May 4, 2018

Amanda Hodge At a debate in East Timor's capital Dili ahead of next Saturday's elections, an argument flared between candidates and party flacks over who had the biggest dreams for the 16-year-old nation.

The National Congress for Timorese Reconstruction (CNRT), the party led by resistance hero Xanana Gusmao which governed for 10 years until it lost power last July to long-time rival Fretilin, accused its successor of lacking ambition for East Timor's economic future.

"We have to dream big to realise our potential," insisted Francisco Monteiro, president of national oil company Timor Gap and one of three representing the CNRT-led coalition that night.

Gusmao's opposition Parliamentary Majority Alliance (AMP), which also includes the People's Liberation Party and youth-oriented Khunto, is tipped to wrest power from Prime Minister Mari Alkatiri's 10-month-old government following the most divisive election campaign in East Timor's short democratic history.

"It is not enough just to dream," countered Edio Guterres, a debater from Fretilin. "You must also have a good plan. Fretilin can talk of big dreams, so can AMP. But we have to think realistically."

In recent weeks it has been insinuated that Dr Alkatiri, as a Muslim in largely Catholic East Timor, should not hold high office.

He and former president Jose Ramos Horta, once the diplomatic faces of East Timor's resistance against Indonesia's 24-year occupation, have also been accused of strutting the international stage while their countrymen and women shed blood at home.

Others allege Mr Gusmao, prime minister from 2007 to 2015, allowed rampant cronyism during his party's decade in power. His nephew, Nilton Gusmao, has held lucrative government contracts and is said to be one of the country's wealthiest men.

Dr Alkatiri's government has been forced back to the polls after the AMP blocked supply, arguing the minority government was unconstitutional.

It was the pursuit of a dream in the face of near-impossible odds that helped East Timor achieve nationhood in 2002.

But the question for this election is whether the lofty ambitions of the CNRT government have brought the young country to the brink of crisis by sinking billions of dollars into two dubious megaprojects it insists will kick-start a sustainable economic future.

The multi-billion-dollar Tasi Mane petrochemical park on the south coast is intended to process gas from the undeveloped Greater Sunrise gas fields, while a $167 million free-trade zone, with airport, hotels and a marina, is being developed in the Oecussi enclave.

Gusmao's government "front loaded" public spending on both, reasoning they would lead to the development of a domestic oil and gas industry and provide roads, ports and electricity useful to industries such as agriculture, tourism and manufacturing.

East Timor must build up alternative income sources to oil, and quickly. About 90 per cent of the government's budget comes from dwindling revenues from the Bayu Undan oil and gas field which will be tapped out by 2023 and money from its National Petroleum Fund.

On current spending that fund will be exhausted before 2028, too soon to develop alternative income streams. Meanwhile, the logic behind the investment in Tasi Mane is looking flimsy.

The World Bank and IMF have repeatedly expressed doubts about its viability and warned the government's priority must be developing the non-oil economy.

La'o Hamutuk, a Dili think tank which has warned for years of the need to prepare for the end of oil revenue, has called for spending on Tasi Mane to be suspended until agreement is reached on the proposed Greater Sunrise pipeline. No party has signed up to that.

The think tank has sounded the alarm on the future sovereign risk of borrowing money for unviable projects from "less scrupulous" lenders, echoing concerns raised in the region in relation to Chinese loans, though its debt exposure is not high.

Tasi Mane's viability depends on piping an estimated $53 billion worth of gas from Greater Sunrise across a deep-sea trench to East Timor, when onshore LNG processing facilities already exist in Darwin. The joint-venture developers favour the Darwin option.

East Timor had hoped that in winning its dispute with Australia in March to establish permanent maritime boundaries, it could compel developers to agree to the pipeline. Instead, the UN Conciliation Commission which ruled in its favour on the border issue reaffirmed doubts about the Timor processing option, concluding it was commercially unviable.

During the election debate, the AMP coalition was asked repeatedly what its contingency plans were for Tasi Mane if the pipeline fell through. It did not answer the question.

"With every investment there is risk but we need to have a political decision to do things because if not, everything is impossible and this country will never move forward," says Mericio Akara, a co-founder of the People's Liberation Party with Taur Matan Ruak, Mr Gusmao's deputy during the resistance.

Until March last year Mr Ruak was East Timor's president and a one-man opposition force in the final few years of the CNRT government which formed a national unity government with Fretilin.

Mr Ruak accused Mr Gusmao and Dr Alkatiri in parliament of awarding lucrative contracts to family and friends while ordinary Timorese did without basic services. Yet his PLP party has now joined forces with CNRT.

"We know the problems, but what is to be done?" says Mr Akara. "If we have no infrastructure, investors will not come. This is the first step, so that we can attract other investors to invest in the non-oil sector.

"Those now saying 'we will collapse' that's not helpful. If all you do is worry the people, what are you achieving?"

But after years of watching the country's oil wealth poured into megaprojects at the expense of running water, schools and health clinics, ordinary East Timorese are worried.

UN figures last month, which showed almost half the population lived below the extreme poverty line and half of children under five suffered malnutrition-related physical and mental stunting, drew a furious reaction from Mr Ramos Horta.

"If I had been a prime minister for 10 years, I would have focused all those 10 years on quality education, on rural development and that means water and sanitation for the people," he said.

The issue is not just that the government has failed to invest sufficiently in lifting the lives of its people, but that many believe too much of that money has gone into the pockets of the elite.

Central to concerns is the lack of transparency surrounding multi-million-dollar contracts.

"Cronyism has become a hot topic this campaign because, after 10 years in power, what has Xanana done to make the lives of ordinary people better?" said one long-time activist. "If we leave it another five years to these guys, it will be a disaster for Timor Leste."

Jose Antonio de Jesus das Neves was a deputy anti-corruption commissioner until early last year when he ran unsuccessfully for president. Now Deputy Education Minister, he says previous efforts to hold government to account over graft and cronyism were sometimes frustrated by intervention from the highest level.

"We have a lot of unfinished projects, many of them with no clear result from money spent," he says. "There needs to be a transition of leadership from these big guys to the next generation. If we don't fix these problems soon they will become more complicated and difficult to solve."

Source: https://www.theaustralian.com.au/news/world/basics-in-east-timor-allowed-slip-as-oil-wealth-poured-away/news-story/c0ca5ac41bcb49110f54fab88f03f952.

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