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How East Timor went from democratic success to failed petro-state

Nikkei Asia - October 17, 2020

Ian Lloyd Neubauer – "Like Bali before the tourism boom." That is how I described East Timor – a young country brimming with hope – when I first arrived there to work as a correspondent in 2009. The factional violence of 2006-2008 had finally ended and the last of the 100,000 refugees internally displaced during the conflict had been repatriated to their homes.

Peace has held in East Timor ever since. This itself is a monumental achievement for a place once known for brutal colonial overrule and a civil war that wracked the island for the best part of three centuries. After the East Timorese people voted overwhelmingly to cede from Indonesia in a 1999 referendum, their country was destroyed by Indonesian-backed militias.

With the assistance of the international community, the East Timorese set about building a nation-state from scratch. Along the way, East Timor has demonstrated global leadership among developing nations. Today, it is the only state in Southeast Asia that is actually moving toward more democracy instead of less.

East Timor has enjoyed successive years of economic growth on the back of oil and gas royalties. Keen to avoid the so-called resource curse or paradox of plenty, which dictates that countries abundant in fossil fuels and minerals tend to have less economic development and democracy than countries with fewer natural resources, East Timor followed Norway's example and deposited those revenues in a special sovereign wealth fund.

Returning to East Timor after a long absence in 2018, I saw some examples of the nation's early successes: a rural electrification plan that increased coverage from 20% of households in 2002 to 80% had brought scores of villages out of the dark; a handful of tall shiny buildings in the capital Dili, with modern malls and global franchises to go with them.

But that was about the sum of the progress I could see. The tourism boom I had predicted based on the pattern set by other post-conflict nations like Cambodia and Myanmar never materialized. In 2018, only 75,000 tourists visited East Timor. That is about how many tourists arrive in Bali every four days.

The roads were even worse than I remembered from a decade before. Now, the 40 km drive from Dili to One Dollar Beach, a world-class dive site, took two hours on a dirt road with potholes the size of bomb craters. When heavy rains fell one afternoon, I found myself driving through a river in the middle of Dili. Where had the $10 billion that successive governments claimed to have spent on infrastructure over the past 18 years gone?

The most visible change was something far less tangible: a loss of hope. On previous visits, one thing that had always stood out to me was the East Timorese peoples' hope for a better future. Now it was gone.

At Tibar, on Dili's outskirts, where a $500 million commercial port is being built, I saw children as young as eight working as scavengers at a rubbish dump. Every time I went to the supermarket, beggars standing outside asked me for change. "I'm hungry," one man said, summing up the plight of his nation.

"There is no infrastructure of any quality," one foreign investor in the capital Dili told me recently on condition of anonymity. "The current workforce is mostly uneducated and unskilled while children face a bleak future with no job prospects."

The uncomfortable truth today is that East Timor's public services is a shambles from top to bottom. The tourism industry has been stifled by ministers who have no idea how to progress forward or take advice unless it benefits themselves. And apart from a few small coffee plantations, there are no income streams of note. Once the oil wells dry up, there will be nothing at all.

Perhaps worst of all is that after shelling out $650 million in 2018 to Shell and ConocoPhillips to buy out their stake in the Greater Sunrise oil and gas field operated by Australia's Woodside Petroleum, East Timor's stake is now valued at zero.

That deal was the first step in a grand plan hatched by independence hero and former prime minister and president Xanana Gusmao to build a domestic petroleum industry. The plan included $450 million for an airport and highway on the sparsely populated southern coast, despite advice from every expert in the business that the entire plan was unfeasible.

Now mothballed, it has cost East Timor at least $1.1 billion, about the same as the country's gross domestic product last year. It is a dangerously incompetent venture that should be the subject of a national inquiry.

Meanwhile, investment in agriculture, which 80% of the population relies upon to survive, attracted only around 2% of last year's national budget. Investments in health, 0.3% of GDP, and education, 0.2% of GDP, were even more abysmal.

Herein lies the root of the problem: the allocation of the lion's share of government spending to large-scale infrastructure and vanity projects.

This top-down approach to economic development must be nixed in favor of an approach focused on delivering basic services and building more diversified industries that will actually create long-term jobs such as tourism and manufacturing. Until this happens, East Timor will rank yet another failed petro-state, plagued by hunger and hopelessness.

[Ian Lloyd Neubauer is a freelance journalist based in Indonesia.]

Source: https://asia.nikkei.com/Opinion/How-East-Timor-went-from-democratic-success-to-failed-petro-state