FINANCE: East Timor Supporters Cautious About Donor Pledges

By Thalif Deen Reprint | | Print |

Thalif Deen

UNITED NATIONS, May 15 2002 (IPS) - The international donor community pledged more than 360 million dollars in development assistance Wednesday to the nascent nation state of East Timor, which will be formally inaugurated Saturday.

The pledges, to be spread over a three-year period, were made at a two-day conference of 27 mostly Western donors and multilateral agencies in the Timorese capital of Dili.

The 360 million dollars will complement 81 million dollars already available through a multi-donor trust fund, bringing the total to more than 441 million dollars in international support.

Some of the money will go to bridge a 90-million-dollar gap in East Timor’s budget for the next three years.

John Miller, of the New York-based East Timor Action Network (ETAN), told IPS he was “heartened” by the level of donor commitment but expressed scepticism over the projected budget deficits.

Miller said the original deficit estimate was in the region of 160 million dollars but was brought down “somewhat magically” to about 90 million dollars.

“They cooked the books by increasing revenue projections and paring down expenditures,” he said.

Some of the projections were realistic, others were not, he said, adding that the finance minister resigned a couple of weeks ago “due to World Bank pressure.” Miller wondered whether the revisions in the budget would jeopardise both the needs of the people and the country.

A significant portion of the projected revenues, mostly from oil and gas, he said, would be available only in the next three to five years.

Miller said it remains to be seen if the promised aid could be categorised as unconditional grants or if it would be tied to market-friendly governance and economic-policy initiatives. “We have to read the fine print,” he said.

At the conclusion of the donor conference on Wednesday, Chief Minister Mari Alkatiri said: “Our national development plan sets an ambitious path for our development. Our challenge will be to ensure that we have the persistence to implement it and the flexibility to make changes and improvements as conditions allow.”

Klaus Rohland, World Bank country director for East Timor, said the composition of the budget was strongly pro-poor, with 48 percent of the core budget allocated to health and education by 2005.

“This is one of the highest allocations to social sectors in the world, and is a concrete reflection of the government’s commitment to development in those areas,” he added.

The weekend’s formal flag-raising ceremony, at which U.N. Secretary-General Kofi Annan will hand over power to Francisco Guterres, the president of the East Timor parliament, “is only the start because the government of East Timor faces enormous tasks,” said Annan.

“It must not be left alone. The international community must ensure that the investment it has made does not go to waste. It will still have a crucial role to play in helping the East Timorese to consolidate their new institutions,” he said.

Annan told the Security Council last month that he wants the United Nations to stay engaged for three more years in building the new nation state.

The United Nations has been administering East Timor since October 1999 when the Security Council created the U.N. Transitional Administration in East Timor (UNTAET).

“I am confident that the Timorese will continue to develop their own sources of revenue and to manage their resources prudently, in keeping with their track record thus far,” he added. But East Timor, he insisted, would continue to need financial and budgetary assistance.

Australia and East Timor have already signed a bilateral treaty – called the ‘Timor Sea Arrangement’ – to govern oil and gas fields they share in the Timor Gap.

The treaty, if implemented, will provide East Timor with over 3.6 billion dollars in revenues over two decades. These revenues are expected to be East Timor’s key sources of income after independence.

But the treaty will not come into force until it is approved, signed and ratified by the newly elected government in Dili.

The treaty arrangement will provide East Timor “with a very substantial and long-term revenue flow to support its development.”

In a report released last month, the United Nations said that although oil and gas reserves will be of critical importance for East Timor, agriculture and fishing remain the single largest contributors to the country’s gross national product.