Thursday, November 14, 2013

Change economic direction or face 'bleak' future warning for Timor-Leste

The La'o Hamutuk logo sign outside the development advocacy group's office
in Bebora in the Timor-Leste capital of Dili. Photo: David Robie
THE INDEPENDENT Timor-Leste development advocacy group La'o Hamutuk has called for an urgent review of national budget planning priorities for next year or the country will face a "bleak" future.

The Asia-Pacific nation's oil and gas revenues are predicted to dry up by 2020 - six years earlier than has been previously thought.

"We have only six years to develop our non-oil economy and markedly increase domestic revenues, which is an urgent national challenge," La’o Hamutuk said in an open letter to the national Parliament.

As well as greater emphasis on "human infrastructure" development, the advocacy group also called for more transparency around the budget debate and better consultation with civil society.

Earlier this year the 2013 budget process dropped the traditional plenary debate in favour of a closed door ad-hoc committee review.

But a government media release said the US$1.5 billion budget for 2014, currently before Parliament, would be debated in plenary sessions and broadcast on state radio and television “in the interests of transparency”.

Ironically, a local daily newspaper, Diariu Independente, yesterday highlighted a front page story about the La’o Hamutuk letter, describing the NGO in a headline as being “left in the dark” about the budget.

Critical analysis
Many analysts would argue that La’o Hamutuk’s critical analysis of the budget was in fact well-informed.

The La’o Hamutuk letter said that according to the budget’s own documentation the Bayu-Undan oil field production would be “significantly lower than previously expected – it will be empty by 2020”.

“In 2011, 81 percent of our GDP was from oil and gas, which will provide 93 percent of state revenues by 2014,” the letter said.

La’o Hamutuk called on Parliament to examine all economic viability studies which have been done for the massive Tasi Mane development projects on the south coast and to verify their reliability – “as cost estimates fluctuate wildly”.

The National Procurement Commission has just announced it plans to award a US$68 million contract for Suai Airport, which is a “questionable project and should be re-examined”, according to La’o Hamutuk.

“We also doubt that it is wise to continue to spend money for studies related to the Beacu LNG plant and Betano refinery, when no progress has been made toward ensuring the possibility or viability of these projects,” the letter said.

The advocacy group also cited the Dili Airport expansion – “which has jumped in total cost from US$78 million to more than US$350 million” – and Tibar Port plans had grown from US$124 million to US$148 million.

Trade deficit
“In particular, the projection of Tibar Port traffic expects Timor-Leste to have a trade deficit in 2040 of more than US$5 billion per year; how will we pay for these imports when we have no more oil income?

“We need to truly understand Timor-Leste’s economy … The fundamental fact [is] that the part which is not driven by state spending: agriculture, manufacturing and private sector trade – is stagnant or shrinking.

“If we cannot reverse this trend, long before oil revenues run out in six years, Timor-Leste’s future is indeed bleak, and most of our people will be unable to provide for daily necessities,” the letter said.

“GDP counts dollars, not people, and therefore measures the well-being of the most affluent people in every society."

La’o Hamutuk urged Parliament to seek information about the number of people in Timor-Leste living in poverty. Official data is six years old.

Inflation has raised the poverty line of US$0.88 a person per day in 2007 to about US$1.31 a day.

“Much more than half of our rural population gets by on less than that – and the number is increasing daily,” said La’o Hamutuk.

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