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East Timor News Digest 10 – October 1-31, 2011

Hospitality & tourism

Mining & energy Economy & investment Balibo

Hospitality & tourism

Dawn of a bright new era in East Timor, land with a tragic past

The Australian - October 8, 2011

Jill Jolliffe – East Timorese hotel manager Alice Goncalves has survived many bad moments in the hospitality business.

The worst was as a young woman in December 1975, when she found herself kneeling at gunpoint in the front yard of Dili's Hotel Turismo with all the hotel guests. "These guys were the Indonesian army's red-beret soldiers. I thought I would die," she recalls.

She was saved by her resourceful mother-in-law, Carolina Mascarenhas Goncalves, then managing the hotel, who had earlier confronted troops disembarking in Dili harbour to demand safe conduct from the commander, Colonel Dading Kalbuadi. "Maybe he thought my mother-in-law was funny," Alice muses. "Brave or funny, I don't know... he gave her a pass and it saved our lives. That day when they were ready to kill us, she said, 'Look, we have this paper', and they let us go. She was a gutsy woman."

The near-execution occurred just three months after five former Hotel Turismo guests, the young newsmen later dubbed Balibo Five, had been killed in the border town of that name during an overland invasion preceding the Dili landing. Another guest, reporter Roger East, was executed at the Dili wharf on December 8, 1975; Alice remembers them all.

In 1977 she fled to Indonesia, where she was later assisted to freedom by a mysterious but kindly Indonesian general. With her husband, Rui, she won political asylum in Australia and lived here until the 1999 Indonesian withdrawal, when they returned to East Timor to revive the hotel's fortunes. By 2005, she was manager.

In 2009, Australian filmmaker Robert Connolly commemorated the dead newsmen in Balibo, with many scenes filmed in the hotel. Since its construction in 1969, the simple art-deco-style building had housed an array of colourful guests, from journalists and generals to writers, spies and backpackers.

In its heyday as a favoured watering hole, Hotel Turismo was to Dili what The Strand was to Rangoon, Raffles to Singapore and The Oriental to Bangkok.

Alice survived, but the historic hotel didn't. In January last year, it fell under the developer's hammer after a deal between the Timorese government and a local investor abruptly ended the lease. Alice and Rui were ordered to leave along with all their guests, or face eviction by police. The old building has been razed and a new version, Hotel Novo Turismo, is under construction on the site. First impressions, to my mind, suggest vulgar grandiosity.

Undaunted, Alice and Rui have opened Tibar Beach Retreat on a peaceful bayside slope 15 minutes west of Dili. It features eight boutique bungalows with a garden stretching down to Tibar Bay.

Alice is training a team of young Timorese staff and chef Zaida Cardoso is cooking at its Ximangane restaurant (named after Rui's pseudonym as a resistance fighter). Alice's previous Hotel Turismo touches are recognisable in crisp white tablecloths, gleaming glassware and posies of tropical flowers.

Zaida, born in Portuguese Africa, emigrated to Lisbon at 19, where she learned her profession and worked at top restaurants. She describes her cooking style as "a fusion of Mediterranean cuisine with traditional Timorese".

Fresh fish is a menu strong point, including ikan saboko, or spiced garoupa roasted in banana leaves with bay leaf, ginger, lemon and black pepper.

Tibar Beach Retreat comes into its own at weekends when it is often packed with UN staff, aid workers and Timorese officials who like to linger over dinner, their conversations irrigated with fine Portuguese wines; Jose Ramos-Horta is an occasional visitor. Deep-sea fishing excursions can be booked, as well as trips into the mountains.

The eight bungalows are built of eco-friendly timber-milled coconut palms and the decor is quietly luxurious. For Rui and Alice it has been a long journey, but with determination they have prevailed against all odds, including Indonesian guns and post-independence deals.

Mining & energy

Companies from China, Japan and South Korea interested in oil and gas

Macau Hub - October 21, 2011

China – Companies from China, Japan and South Korea has shown interest in oil and gas exploration in East Timor, but an agreement has yet to be signed, the Timorese minister for the Economy and Development, Joao Goncalves said Thursday in Macau.

"There have been some initial contacts, not only with Chinese companies, but also with South Koreans companies and Japan is also interested," the minister said speaking to Portuguese news agency Lusa.

However Joao Goncalves said that "at the moment nothing has been signed," and explained that a "Timorese state company," had been set up, "to negotiate every possible partnership for exploration of oil and gas in Timor."

Timor president optimistic on deal for gas project

Reuters - October 21, 2011

Singapore – East Timor President Jose Ramos-Horta said on Friday his compatriots who met the new Woodside CEO Peter Coleman were "positively impressed by him" and expressed hope that the two sides will be able to find a solution to develop a large gas project in the country.

"I believe they can agree on a solution though what it is, I don't know," Ramos-Horta said at a lunch talk organised by Singapore's Foreign Correspondents Association. "The mood is positive."

Woodside new chief executive, Coleman, has signalled a more conciliatory approach on the development of the Greater Sunrise gas field project, saying he wanted to restart a dialogue with East Timor.

The development of the project has been delayed due to a bitter dispute between the East Timor government and Australia's Woodside on the location of a liquefied natural gas plant(LNG).

Woodside, which heads a consortium of firms developing the gas field, wanted a floating LNG plant, while East Timor demanded that the plant be built on its shores to create jobs in the impoverished country.

Woodside makes progress in Timor LNG talks

Australian Associated Press - October 21, 2011

Woodside Petroleum seems to be making progress with its stalled Sunrise project, saying its new chief executive Peter Coleman has held constructive talks with the Timor-Leste government.

The planned, multibillion-dollar liquefied natural gas project has been held up for several years because the Timor-Leste government wants a processing plant for Sunrise built on its shores but Woodside prefers a floating plant.

Previous chief executive Don Voelte in April said the Timor-Leste government had ignored requests for talks on Sunrise and indicated that East Timor Secretary of State Agio Pereira was the main impediment.

However, the oil and gas producer on Friday said Mr Coleman had recently visited the south-east Asian state and meetings had been positive. "Woodside continues to build on engagement with both the Timor-Leste and Australian governments," the company said in its third-quarter report today.

The report showed Woodside boosted revenues in the three months to September 30 by 27 per cent to $US1.313 billion ($A1.29 billion) from a year earlier as higher commodity prices offset lower production levels.

Production totalled 16.1 million barrels of oil equivalent (MMboe), down 12 per cent on the September 2010 quarter, due to outages and planned shutdowns at the North West Shelf in Western Australia.

The drop in output was also due to lower production volumes at the Enfield and Vincent oil projects off WA, and at its Laminaria-Corallina oil operation in the Timor Sea.

This was partially offset by higher output at the Stybarrow oil project in WA and domestic pipeline production volumes.

The company reiterated its full-year production forecast of between 62 and 64 MMboe, as well as its March 2012 target for first LNG production at its Pluto project in WA.

Progress was made during the quarter at the contentious Browse LNG project in WA, with the continuation of front-end engineering and design studies along with work to secure environmental approvals.

On Friday, an anti-Browse gas hub protester tied himself to a 30-metre communications tower near the project in a bid to stop survey work. Police said it was not impeding work, with contractors on site, but the protest may stop heavy machinery getting through.

A final sign-off for the project by Woodside and its joint venture partners is expected by the middle of next year. Shares in the Perth-based oil and gas producer fell 22 cents to close at $33.38, the lowest in two weeks.

Woodside, East Timor to hold talks on LNG plant

Reuters - October 21, 2011

Australian oil and gas firm Woodside Petroleum aims to hold further talks with the East Timor government on its stalled Sunrise LNG project, the company said, but analysts played down the chances of an easy breakthrough to resolve the lengthy dispute.

East Timorese officials have told media in recent weeks that Woodside had agreed to revisit the idea of onshore processing from the Greater Sunrise gas field in the Timor Sea, which the East Timor government wants in order to create jobs, instead of a floating liquefied natural gas facility.

Woodside has sounded a more conciliatory note on Sunrise under its new chief executive officer, Peter Coleman, who recently held meetings with the government in Dili, but has stopped short of saying it will reconsider an onshore option. "We strongly believe it is not beyond all of us to find a solution to the current impasse," a Woodside spokesman said.

Under Woodside's former chief executive, Don Voelte, known for his assertive style, the company's negotiations with East Timor had become embittered, with each side accusing the other of intransigence and lack of good faith.

On one occasion, protesters prevented Voelte and other representatives of the joint venture from leaving an airport lounge for two hours, according to one media report.

Industry analysts said that while Woodside's fresh approach was much needed, it was still unclear when and how the long conflict over the location of the LNG plant will be resolved.

"Through the long history of the project, there's been multiple occasions on which there's been a potential indication of a solution to the impasse or potential give from both sides," said Benjamin Wilson, an analyst for JPMorgan Chase in Sydney. "The fact of the matter remains, it's still stalled."

Onshore production brings with it a host of engineering challenges as well as a higher price tag, said Di Brookman, an analyst with CLSA. "At the end of the day, it's the cost that's going to be absolutely significant," Brookman said.

Wilson agreed, saying a floating option was the most commercially viable. "Whether they can still justify the project on a returns basis if they are required to build an onshore processing facility in Timor remains to be seen."

Coleman has been cautious on when he may sanction other key projects. He is counting on the 14.9 billion Australian dollar ($15.3 billion) flagship Pluto LNG project off Western Australia to ignite growth in 2012, but has said he is not going to be bound by the end-year deadline for deciding on expansion.

In its latest production report on Friday the company said that it remained committed to making a final investment decision on its Browse project by mid-2012. It also said that it would release early one of two rigs exploring for gas on the Pluto project.

Shares of Woodside fell 0.7 percent on Friday, extending the previous day's 4 percent decline.

Timor-Leste: Observers divided over oil fund investment

IRIN News - October 19, 2011

Dili – A new bill allowing more diversified investments by Timor-Leste's multi-billion dollar oil and natural gas sovereign fund, which underwrites the lion's share of the country's expenditure, has divided opinion, with some saying the step is necessary to maintain current levels of development spending and others calling the move risky.

The amendment, passed by parliament in late August and recently approved by the president, allows for up to 50 percent of the Petroleum Fund, currently exceeding US$8.7 billion, to be invested in equities, including up to 5 percent in other forms of investments.

Under the previous law, all but 10 percent of the fund had to be kept in US-dollar-denominated government-issued bonds, which traditionally have been a safe but low-return investment.

Timor-Leste is little more than a decade out of a violent 1975-1999 occupation by Indonesia, during which an estimated 180,000 people were killed, hundreds of thousands were displaced, and the country's infrastructure was left in ruins.

Oil revenues have funded much of the country's rebuilding efforts. More than 90 percent of government finances come from the Petroleum Fund, which makes it instrumental in the livelihoods of the country's one million inhabitants. Any plans to alter the fund are therefore contentious.

Changing the model

Established in 2005, the fund was intended to help avoid the "resource curse" of corruption, wasteful spending and inflation that have often made people in developing countries worse off when their governments come upon sudden wealth from non-renewable natural resources, which discourages long-term planning, fiscal responsibility, and development of productive sectors of the economy, activists say.

Timor-Leste's Petroleum Fund was modelled on Norway's conservatively designed sovereign wealth fund, whereby the Nordic country uses its considerable oil revenues to cover pension payouts today.

A formula called Estimated Sustainable Income (ESI), a guideline for the maximum amount the government should spend from its Petroleum Fund, is supposed to ensure annual withdrawals for public spending are limited to amounts that will allow the fund to last for many generations after oil and gas reserves are exhausted.

The Petroleum Fund's ESI had originally been set at 3 percent of the country's total present and expected future oil and gas wealth. However, the government has been overspending: 3.8 percent in 2009, 4.8 percent in 2010, 4.3 percent in 2011, and it proposes 7.2 percent for 2012.

Proponents of the new bill, which was spearheaded by the Ministry of Finance, say the only way to raise the fund's rate of return, and thus make current levels of government spending sustainable, is to invest a larger share of the fund in equities.

Financial exposure and corruption concerns

Tim Anderson, a professor of political economy at the University of Sydney and former adviser to Timor-Leste's Consultative Committee for the Petroleum Fund, said the changes invited financial risks – especially given recent volatility in international stock markets – and corruption, the consequences of which would ultimately fall on poor Timorese. Any amendments to the investment model should be more modest, he said.

In a written response to IRIN, the Finance Ministry said new equities would be acquired through a "controlled and high-quality process" undertaken gradually, with oversight by multiple government offices. Ensuring the fund's assets are highly diversified "is the antidote to many avoidable risks", the ministry said.

However, this is contradicted by another revision just made to the Petroleum Fund law, exempting Timorese "external investment managers" from standards required of international companies entrusted to invest in the fund, activists say.

How much to spend

The Timorese government remains institutionally weak, and there are strong concerns about its ability to manage the fast-rising state budget.

The government's annual budget has increased from $70 million in 2004 and $650 million in 2009 to $1.3 billion in 2011, and $1.8 billion proposed for 2012 – with nearly all the monies coming from the Petroleum Fund.

Jeffrey Sachs, a professor at Columbia University, is among those encouraging the government to open its coffers at a faster rate to jumpstart the country's development.

"I'm less interested in building up international financial assets than I am in seeing children going to school, having proper nutrition, building up the health sector, making sure there's an education all the way through secondary [schooling] universally and tertiary for a rising proportion of students," he told IRIN in Dili, where he was attending a development conference. "I'm interested in there being a good power grid, safe drinking water, disaster preparedness and so forth."

There are strong concerns, however, that sharp increases in spending will spur corruption, not to mention wasteful and misdirected mega-projects over the development of productive sectors of a non-oil economy once the country's two producing oil fields are depleted.

"If you can spend more money well on health and education, you would have an excellent return," says David Hook, a governance specialist with the World Bank in Dili. But, he added, "The question is the capacity of state institutions to manage more money."

In recent years there have been increasing allegations of corruption in government contracts for foodstuffs, services and infrastructure projects. (bb/ds/mw)

New dawn for Timor gas

Sydney Morning Herald - October 10, 2011

Peter Ker – Woodside Petroleum has opened the door on East Timor's biggest-ever resource project, with the company agreeing to revisit the concept of processing gas from the "Greater Sunrise" gas field on East Timorese soil.

Development of the Timor Sea gas field has stalled because Woodside and its joint-venture partners want to use a floating processing plant to handle the gas, putting them at odds with East Timor's desire for an onshore plant that will create jobs in the impoverished nation.

The disagreement soured relations between the two parties during the reign of former Woodside boss Don Voelte, leaving new chief executive Peter Coleman to repair relations during recent talks in East Timor with its Secretary of State for Natural Resources, Alfredo Pires.

According to the East Timor government, Mr Coleman indicated during those talks that an onshore plant was not off the table, as it was during the Voelte era.

"In the meeting with Mr Coleman, Secretary of State Pires reaffirmed Timor-Leste's position. Mr Coleman expressed his willingness to reassess the position with joint venture partners," it said.

The apparent willingness to reconsider an onshore processing plant comes less than two months after Mr Coleman indicated the company would not even discuss a deviation from the floating option.

"It's too early for us to move away, or even have discussions around a different development concept for Sunrise," Mr Coleman said on August 17. "We really do believe we have the right development concept."

While a floating platform remains Woodside's preferred option, the company did not deny it had offered to reconsider the onshore option during the recent talks with East Timor.

"Woodside recently held good meetings with the Timor-Leste Government and we are focused on finding a solution to develop Greater Sunrise," said a spokeswoman for the company.

"All parties involved with Greater Sunrise, including both governments and the joint venture, are aligned in their desire to see this resource developed."

While Mr Coleman's more diplomatic approach to negotiations appears to have brought the parties closer together, recent comments by East Timor's President Jose Ramos-Horta suggest a final agreement is still a way off.

"The difference of opinion between us and the consortium remains, and on our side we're extremely worried about the risks of [the floating option] and the cost," he said on September 22.

But Mr Ramos-Horta added that Mr Coleman had left a "very positive" impression, and had negotiated without "arrogance or dogma".

Despite Woodside being the operator and biggest stakeholder in the Greater Sunrise project, responsibility for striking an agreement rests with the Australian and East Timorese governments under treaties struck to develop the gas fields that straddle the two nations' borders.

Woodside's minority partners in the joint venture include Royal Dutch Shell, ConocoPhillips and Osaka Gas, and the fields are estimated to contain 5.1 trillion cubic feet of liquefied natural gas and 226 million barrels of condensate.

Economy & investment

East Timor mulls Temasek-style investment firm

Agence France Presse - October 22, 2011

East Timor is mulling an investment firm based on Singapore's Temasek Holdings to invest part of the country's billions of dollars in petroleum revenues, President Jose Ramos-Horta said Friday.

He said East Timor can use the money not only to build roads and other infrastructure but also to buy strategic assets overseas in such sectors as telecommunications, property and renewable energy.

New legislation now allows the government to invest 50 percent of the country's Petroleum Fund into domestic infrastructure and a diversified asset portfolio abroad, up from only 10 percent previously. The other 50 percent is invested in US Treasury bonds.

East Timor's Petroleum Fund has been growing at an average 10 percent over the past decade and is expected to reach nearly $9.0 billion in December, the president told the Foreign Correspondents Association in Singapore.

"We are looking into some model like Temasek," he said. "Our minister of finance has been investigating these experiences (of Temasek) to see how we can... invest domestically and internationally."

Temasek is one of two state-linked Singapore investment companies that has stakes in companies locally and overseas, including Singapore Airlines and other firms in telecoms, finance and real estate, among others.

"The first priority is to invest the money in infrastructure development in the country," Ramos-Horta said. He cited a planned $600 million dollar project to redevelop the existing airport in Dili by extending the runway and building a new terminal.

Part of the Petroleum Fund could also be invested in "sovereign debt or in strategic assets (and) that can be anywhere from China to India to Europe – whether in telecoms or renewable energy," he said.

Resource-rich East Timor won formal independence in 2002, three years after a UN-backed referendum that saw an overwhelming vote to break away from Indonesia, whose 24-year occupation cost an estimated 200,000 lives.


A tribute to Balibo

The Australian - October 8, 2011

Robert Connolly – In 2009, I took a small film crew to East Timor to make the feature film Balibo, a story depicting the events surrounding the Indonesian invasion of this newly independent nation in 1975.

Twelve months earlier, I had headed to East Timor to meet and attempt to convince Nobel laureate and President Jose Ramos-Horta that making the film in his country, in the places where the tragic events took place, was worth supporting.

This trip and meeting were made more complex because the screenplay depicted Ramos-Horta as the much younger man he was in 1975, an infamous Che Guevara-like revolutionary, consummate womaniser and formidable diplomat.

Ramos-Horta refuses to live in a formal presidential palace; his home is a far more humble traditional structure just east of the heart of the nation's capital, Dili, and a five-minute walk to the beach. Six months later, a failed attack would see him take three bullets in the gut in the very home we visited to argue our case.

I had sent the screenplay earlier, uncensored (despite my better judgment that softening the edges might have made our task easier), together with a DVD starring the actor we proposed to cast as his younger self.

"This actor," he began immediately after we arrived, "I have shown his film to some close friends, women. 'Is he good looking enough to play me?' I asked them. 'No,' they all agreed. 'Certainly not.' George Clooney, I was thinking, would be better – what do you think?"

A cheeky, playful twinkle in his eye betrayed his mischief. He was curious about our first impressions of East Timor. The impact of Indonesia's savage withdrawal in 1999 was everywhere: sprawling displaced-persons camps surrounded the airport, UN and Australian troops patrolled the streets, almost the entire infrastructure remained damaged in some way. At the airport in Darwin that very day, we told him, the Australian government had raised the security advice for travel to East Timor to only one step beneath post-invasion Baghdad.

The travel warnings clearly frustrated him; they discouraged tourism and investment. The US warnings were the same, he said. East Timor was, as we found while filming, as safe as Ramos-Horta had promised us that night over dinner. In one minor public joke to make a point, he had posted an official warning to East Timorese travelling to New York: "Please be advised that if you are dark of skin, using the subway in certain parts of New York is unsafe."

The shoot would require permission to film in the remote town of Balibo, where five young journalists had been murdered by invading Indonesian troops to conceal the truth of a covert military incursion. Ramos-Horta had been in Balibo in 1975 with the journalists and had warned them of the dangers before heading back to Dili to await the full-scale Indonesian invasion that would take place by sea and air only a few months later. The world would turn a blind eye.

Ironically, in the heart of Balibo, a statue looks down on the square where the journalists were killed. A relic from the Indonesian occupation, it depicts a man breaking chains, the shackles of colonial occupation. After 400 years of Portuguese rule, the Timorese enjoyed only nine days of independence before Indonesia claimed this small nation as its own. Ramos- Horta offered that night to tear it down if it would make filming easier, and gave us the permission we needed to move ahead.

Balibo, a four-hour drive from Dili, sits on a strategically high vantage point looking down towards the Ombai Strait and the border with Indonesian West Timor. A 400-year-old fort built by the Portuguese continues to take military advantage of this extraordinary location, with Australian troops stationed there in 1999.

On the evening before we re-created the Indonesian invasion of Balibo and the murder of the journalists, Lieutenant Colonel Sabika turned up with Ramos-Horta's blessing, together with more than 100 of his troops. Not only would they help depict the invasion by playing the invading soldiers, but Sabika himself would be our guide. As a young commander in the East Timor army in 1975, he had defended Balibo on the morning of the invasion. His troops camped in the fort for the night.

Looking down towards the sea at dusk, Sabika showed us where the boats had been positioned, where the troops had landed and the direction they had attacked from. It was humbling to stand there with a man who 35 years earlier had attempted to defend this town. We slept that night next to a small church beneath the fort; the five actors chose to stay in the house the journalists had slept in the night before they died.

On the wall at the front of that building, recovered beneath layers of paint, a picture of the Australian flag has been framed. The journalists had hoped it would afford them some protection.

Together, before daybreak, we all headed up to the fort to prepare to film. Never before had the idea of sunrise held such significance on set. A coronial inquest had explored the reasons the journalists had remained after Sabika and his men had retreated on that fateful day.

The journalists' 16mm cameras required natural light to shoot some footage of the invasion. They had perhaps stayed until the sun had only just broken the horizon in order to film, but by then it was too late and they were murdered shortly after.

Cameras ready, we too waited for that moment, a soft light only just revealing the landscape. Among the many moments in filmmaking that are repetitive and dull, the more sublime moments, rare as they are, can be extraordinary. That morning remains the most moving of my career.

Standing by on that hill with the Australian and Timorese cast and crew poised, Sabika's troops waiting down below to recreate the attack, the anticipation was overwhelming. The sun broke the horizon and we began to film.

[This is an edited extract from Lights, Camera... Travel! (Lonely Planet, $24.99; lonelyplanet.com), a new anthology featuring "rich, raucous, and intimately revealing on-the-road tales by 33 international actors, directors and screenwriters", edited by Andrew McCarthy and Don George. Robert Connolly travelled to East Timor in 2009 to make the feature film Balibo. He was awarded the Timorese Presidential Medal of Merit as part of the nation's 10th anniversary of independence celebrations.]

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