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Despite oil and gas, Timor at poverty tipping point

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Australian Associated Press - March 9, 2006

Rob Taylor, Jakarta – East Timor is at a tipping point and must use billions of dollars from the carve-up of undersea oil and gas reserves wisely or continue its downward spiral into poverty, a new report has warned.

Four years after winning independence and a bloody retaliatory rampage by pro-Indonesia militiamen, the tiny nation is still one of the world's poorest, with an average yearly income of only $US370 ($A505) and falling – the lowest in Asia.

Amid chronic unemployment, the average life expectancy of Timorese is flat at only 55.5 years of age and 60 babies out of every 1,000 die before their first birthday, the United Nations Development Program (UNDP) said in its "Path out of Poverty" report.

The country also faces security challenges after 600 soldiers – almost half East Timor's 1,500-strong army – went on strike over poor conditions and discriminatory promotions.

But a crucial Timor Sea oil-and-gas deal struck with Australia in January after a bitter and long-running dispute was a potential saviour. Under the deal East Timor will get half the tax and royalty revenues from the $A40 billion Greater Sunrise Field, which lies in disputed waters to Australia's north.

To get the project started after developer Woodside Petroleum threatened to pull out, both countries agreed to defer a row over maritime borders which give Australia two-thirds of the sea area between the two nations under a 1972 agreement struck with Indonesia.

The UNDP said while the reserves would be difficult to tap, the revenues would be key to East Timor meeting UN development goals to cut poverty by a third by 2015.

"Given the likely revenues from oil and gas, (the poverty goal) is technically feasible and financially affordable, so it would be difficult to justify any plan that did not aim to achieve the poverty goal," the report said.

While the snapshot steered clear of the military strike, the UNDP said the government had to pay more attention to working conditions for public servants "including promotion opportunities and incentive structures".

Half East Timor's population did not have access to safe drinking water, while malnutrition affected 46 per cent of children, it said.

International investment and spending was overly concentrated in Dili, leaving the majority of rural people living outside the capital living on less than $US1 ($A1.35) a day.

Oil and gas revenues, which East Timor's government has promised to place in a national Petroleum Fund, would only lower poverty if they were channeled towards rural development, education, healthcare, and job training, the UNDP said.

It called for the government to set up a Rural Development Bank to help farmers and provide more help to the country's budding entrepreneurs.

It also called for land reform and for more of the country's widely spread communities to be brought together to improve access to education and health services.

"It is vital for us to ensure that these funds are managed in a way that benefits all communities in Timor-Leste," Prime Minister Mari Alkatiri said. "This includes widening opportunities for the poorest populations in rural areas."

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