Tuesday, August 26, 2014

La’o Hamutuk calls for inquiry into Timor GAP ‘mismanagement’ of oil resources

The Suai project on the South Coast ... "liberated" land but confused communities.
Photo: La'o Hamutuk
AN INDEPENDENT Timor-Leste development and social justice agency has called for an inquiry into the Timor GAP corporation established to manage the country’s energy resources for the benefit of its citizens, alleging “poor management” and “possible corruption”.

La’o Hamutuk, which has been monitoring state management of the oil and gas industry reserves and government spending, has sent an open letter to the Court of Appeal president Guilhermino da Silva and other agencies.

The state-owned company Timor Gás & Petróleo, E.P. was established in July 2011 and it began operations three months later - but has never filed an annual report for the past three years as required by law, according to La’o Hamutuk researchers.

“La’o Hamutuk has asked them about this many times, and Timor GAP said that problems with the internal audit of their GAP-MHS subsidiary prevented publication of these reports for more a year,” the development agency said in its open letter.

"We believe that Timor GAP, E.P. may have committed legal violations, maladministration, poor management, and possible corruption, as well as ignoring legal obligations for accountability and transparency."

The letter called for an “external audit” initiated by the "Camara de Contas [Tax and Audit Tribunal] or Parliament".

“However, a thorough investigation will take time, as Timor GAP’s records may not be complete or well-organised,” said La’o Hamutuk.

“Therefore we suggest that the Provedoria [Human Rights Providor] and/or Anti-Corruption Commission should also explore whether there is prima facie evidence of maladministration or corruption. If they find such indications, they should look into them more deeply.

'Hidden finances'
“Timor GAP’s finances are largely hidden and are ‘excluded from the consolidated financial statements [the General State Accounts], as they are incorporated under different laws.’.

“However, Timor GAP has already received $13.3 million [Timor-Leste uses the US dollar as its currency] in public transfers from the State Budget. They themselves have been awarded $8.4 million worth of contracts from the Infrastructure Fund, and they are entrusted with managing the Tasi Mane project, which involves hundreds of millions of Timor-Leste’s dollars.

“We have no information on what they have received or borrowed for the commercial activities of themselves and their subsidiaries, or on any of their expenditures.

It was important to get Timor GAP’s “house in order now, before weaknesses in its internal control and accounting systems have more serious consequences for Timor-Leste”, said La’o Hamutuk.

The Timor Gap area between Australia and Timor-Leste.
Source: Dollars&Sense
“In the near future, Timor GAP will become involved with the new CPLP Petroleum Consortium, begin construction of the Suai Supply Base and contracting for the Betano Refinery and South Coast Highway, and incur significant expenses for petroleum exploration under Production-Sharing Contract JPDA 11-106.”

While La’o Hamutuk noted that some of these expenses may be paid by foreign investors, “doubts about the profitability of these facilities could oblige Timor-Leste to guarantee or finance a large portion of their costs”.

Some of the specifics cited in the open letter are:
  • More than a year ago, Timor GAP and MPRM told local residents near the Suai Supply Base to “liberate” their land, but no construction contract had been awarded, although five companies were “prequalified” last November.  “Communities are confused about compensation and relocation,” said La’o Hamutuk.
  • “Suai airport construction has already begun, provoking anger and controversy in the local community as their expectations for compensation and jobs have not been met. Timor-Leste’s highest officials have had to intervene, and the Indonesian contractor has been unable to work.”

  • “Last year, Environmental License No 02/C:A-1/SSE-MCIE/VI/2013 for the Suai Supply Base was granted in violation of Articles 8(a-b), 9.1(h), 10.1(a-b) 11 and other provisions of Environmental Licensing Decree-Law 5/2011 [Portuguese original] as no Environmental Management Plan was presented and no public consultations took place. Political pressures overrode legal obligations, and we hope that these irregularities will be investigated and reversed.
I guess we can hardly hold our breath waiting for answers to these critical questions from La'o Hamutuk. Another reason why a vigorous and probing media and investigative journalism is needed in Timor-Leste - unfettered by a draconian media law - to dig into these murky development issues.

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