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'We've lost 20 years': The future of Asia's youngest nation hinges on a multibillion-dollar payday

Sydney Morning Herald - May 19, 2023

Chris Barrett, Maubisse, Timor-Leste – In the cool air of Timor-Leste's central highlands, Xanana Gusmao takes to a makeshift stage before hundreds of devotees in a park across from the local Catholic church.

"You call me a hero, but you are the heroes," the 76-year-old former president and prime minister tells the crowd. "You are the ones who voted for our independence in 1999."

Gusmao is revered for leading the resistance to Indonesia's quarter-century occupation, having spent 17 years in the Timorese jungle as a guerrilla fighter, including in the hills around here in Maubisse, before being captured and enduring seven years in prison and under house arrest in Jakarta.

Later, after independence was restored in 2002, he was central to another nation-building triumph – the establishment of a permanent sea boundary with Australia that, following a bitter, decade-long dispute with Canberra, awarded the young country the rights to the majority of future oil and gas in the Timor Sea.

When the treaty with Australia was eventually agreed to in 2018, Gusmao called it his final duty, achieved in honour of the estimated 200,000 men, women and children who died under Indonesian rule and in the struggle for self-determination.

Five years later, however, he is back pursuing the prime ministership in Sunday's parliamentary election, hoping to deliver what he sees as one last act of liberation.

Timor-Leste's first president – and its prime minister between 2007 and 2015 – is seeking to return to government and finally realise an ambition to pipe liquefied natural gas from the $71 billion offshore Greater Sunrise fields to the country's south coast.

It's an issue that is of significant interest to Australia, not least because energy giant Woodside is a joint venture partner in the long-stalled Sunrise project with Timor-Leste, and because Jose Ramos-Horta, who was last year elected president with Gusmao's support, has hinted it could turn to China or others for investment if it has to.

Gusmao's vocal prosecution of the case has given extra nationalistic verve to Sunday's election, in which his National Congress for Timorese Reconstruction (CNRT) party is again vying to defeat his long-time adversary, Mari Alkatiri's Fretilin Party.

There is a great deal at stake. As Australia's near neighbour wrestles with stark underdevelopment, particularly in remote areas, the clock is ticking on its revenue stream from natural resources.

The country's sovereign wealth Petroleum Fund covers nearly 90 per cent of state spending, including vital everyday services. But it is projected to be empty by 2034 because Bayu-Undan, another oil and gas field south-west of Sunrise that has pumped billions in Timor-Leste's coffers, has run dry.

It is an increasingly urgent predicament laid bare in a warning from the International Monetary Fund last year that Dili faces a "fiscal cliff" in the next decade if Sunrise is not activated.

Gusmao, who is seen by many as the godfather of the post-conflict nation, admits he is worried about such a bleak scenario. But the outlook has only reinforced his desire to deliver the economic lifeline he has long championed.

"Independence is not to have a flag, a president, a government... independence must mean a situation where people in the rural areas can get some benefits from this," he said in an interview.

"The social aspect, the employment and economic benefits, direct and indirect will be very, very important to our country. We are doing our best to win... not to be prime minister but to save the country."

Betting the house on oil and gas

As hundreds of Gusmao backers arrive in the back of trucks to a pre-election rally in a muddy field in southern Suai, support for the proposed coastal oil and gas megaproject is unsurprisingly strong.

"Or course we want it," said 26-year-old unemployed Herculano Filipe Armada Pinto. "It's our right here. Hopefully, it's going to come soon. Our population is living here without anything. There are no opportunities for us. We stand on this land without doing anything."

Under the terms of Timor-Leste's maritime border agreement with Australia, it would see 70 per cent of the royalties from Sunrise if the gas was piped to its shores. The figure would be 80 per cent if the processing took place instead in Darwin, as has been the preference of Woodside, which holds a 33.44 per cent stake in the project alongside Timor-Leste itself (56.56 per cent) and Japan's Osaka Gas (10 per cent).

Gusmao and other proponents of the Timorese option, however, have always held firm that sending the gas there would be a game changer, bringing much-needed jobs and development to a country that badly needs both.

Some of the groundwork has already been laid. A new $180 million airport, named after Gusmao, was opened six years ago on the south coast in the expectation that Tasi Mane – as Timor-Leste's master plan is known – comes to fruition. A four-lane, Chinese-built $500 million expressway also stretches for 30 kilometres along the coast.

Both are barely used right now – and a section of the highway remains collapsed after being damaged by a landslide four years ago.

"I think [Tasi Mane] should be continued because Mr Xanana has already started the preparation... the airport, the highway," said 40-year-old personal IT worker Armindo de Jesus at the rally in Suai.

"It will totally benefit the local people. It's not only talking about the employees but also benefiting the economic growth in the area. Unemployment is a big issue in Timor-Leste. We need these opportunities."

Amid local enthusiasm, though, there have been major doubts raised about the flow-on effects from Tasi Mane and the viability of piping gas to Timor-Leste. Most startling are the huge set-up costs, estimates of which have been as high as $US19 billion – $US2 billion more than remains in the Petroleum Fund.

La'o Hamutuk, a prominent Timorese non-government organisation, has argued that the value of onshore processing there is grossly overestimated, predicating that most jobs and contracts would go to foreign workers and companies.

It has criticised leaders for their tunnel vision on oil and gas, and for failing to make serious moves to diversify the economy in sectors such as agriculture, tourism, fishing, coffee cultivation and manufacturing to produce sustainable alternative income and jobs.

"We've lost 20 years," said La'o Hamutuk's Marta da Silva. "When our leaders heard the report about the fiscal cliff they were shocked. But I don't know why. We have said it to them for a long time."

There are also questions about how the billions generated by resources in the Timor Sea have been spent.

Some $US24 billion-plus investment returns have poured into the sovereign wealth fund since 2005. But the money has failed to address systemic problems like sub-par infrastructure, from roads to electricity and the internet, and other issues of concern such as water sanitation, malnutrition, housing and health and education services. According to the United Nations Development Programme, 48 per cent of Timorese people are multidimensionally poor.

Alkatiri, Timor-Leste's first prime minister between 2002 and 2006, and then again from 2017 to 2018, also speaks of opportunities being squandered over the years since the gas revenue started flowing.

His feud with Gusmao has been a feature of post-independence politics, and progress has been stifled by the political turmoil of recent years in which budgets have been blocked, ministers vetoed and governments collapsed. But he said the country now needed a united front, not "a one-man show".

"After 21 years, having spent $US16 billion at least, we are still not able to reduce poverty," said 73-year-old Alkatiri, whose Fretilin party has been a member of the governing coalition since 2020 while Gusmao's CNRT has been in opposition.

"We need some kind of consensus in terms of the struggle to fight against poverty. Looking only at every cycle of elections as a struggle for power, it means nothing. It has to be for the people. People have been suffering for decades."

While he is also adamant that Timor-Leste needs to get Sunrise up and running, he says it should be wary about taking on billions in debt and can't continue to bet the house on oil and gas.

"We need new policies in terms of development, in terms of diversification of our economy," he said. "We cannot depend forever on oil and gas."Could China build the pipeline?

Gusmao says he trusts Australia and Woodside will finally go its way on Sunrise, which he believes would be a reparation for Australia "exploiting the situation in Timor-Leste" during and after the Indonesian occupation.

It is ultimately a commercial decision, however, and if there is no agreement Ramos-Horta has indicated the country could look elsewhere for investment in the processing of gas on its shoreline.

One potential alternative backer is China, whose state-owned companies have ploughed hundreds of billions of dollars into foreign infrastructure projects under its Belt and Road Initiative (BRI) and already has a strong presence in Timor-Leste.

It's not hard to notice Beijing's influence here already. It built the presidential palace and defence and foreign ministry buildings, as well as the southern highway and the new Tibar Bay deep-sea port a short drive from the capital. Even an artificial grass football pitch on the coastal road in Dili is branded with the signage of ChinaAid.

Parker Novak, a US-based Timor-Leste fellow with the Atlantic Council's Global China Hub and Indo-Pacific Security Initiative, said there was geopolitical relevance to Tasi Mane, with Dili situated an hour's flight from Darwin and just off the Ombai-Wetar Strait, one of the few deep water passages between the Pacific and Indian oceans.

"I'm in Washington and the best way to get attention in Washington on foreign policy right now is to play the China card. That perks people up. I think it's very similar in Australia and other Western capitals right now," he said.

"And truth be told there are significant geopolitical implications depending on which way Sunrise goes. It's going to be a big deal because of Timor-Leste's geographic location."

But he said the multibillion-dollar question now was whether the China Communist Party would stump up the necessary investment.

"There's a reason that hasn't happened," he said. "At a time when Beijing is recalibrating BRI investments and in some cases rolling back BRI investments because they placed a lot of risky bets in the name of geopolitics that have not had much commercial viability, is Tasi Mane really going to make the cut?"

Swinburne University of Technology professor Michael Leach also points out that there has been no evidence of actual Chinese interest.

But he adds that "the presence of China in the region does provide leverage for smaller states".

"Even if there is no strong intent to go with Chinese investors, it's an option that would keep people in Canberra awake at night," Leach said.

Leaders in Dili say they do not want to be a chess piece in the rivalry between the United States and China. At the same time, they make no apologies for healthy ties with Beijing.

"I've made it clear to all diplomats here [that] every country in the world needs to have economic and trade relations with China," Alkatiri said. "Why not us? We are a small country, we need to.

"We will never have any [foreign] military bases in our country. Some facilities, OK. [But] every year we have an American naval force coming here, not Chinese.

"Our policy on China is one China. Taiwan is part of China, this is our policy. But to be a part of the global strategy of China geopolitically, no. Neither China nor others."

As they go to the polls with their country at an economic crossroads, there is alignment, on that front at least, between Timor-Leste's resistance-era rivals.

"For us, in our foreign affairs policy, we say 'no alliance, no enemies, all friends'," Gusmao said. "For us, no more wars."

– with Raimundos Oki

Source: https://www.smh.com.au/world/asia/we-ve-lost-20-years-the-future-of-asia-s-youngest-nation-hinges-on-a-67-billion-payday-20230504-p5d5qe.htm