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For new East Timor government, poverty is prime challenge

Agence France Presse - July 6, 2012

Vincent Souriau – The abject poverty visible only an hour's drive out of East Timor's capital illustrates the challenge facing the government that takes over one of Asia's poorest countries after elections on Saturday.

Thirteen years after the end of an Indonesian occupation that left over a quarter of its population dead, East Timor is struggling to lift its people out of poverty despite potential riches from offshore energy.

In the village of Lora Lau, children walk barefoot and eat from the bare ground in slums. Olandina Guterres, 40, makes a meagre living for her large family selling baskets and hats from braided banana leaves.

"I consider myself fortunate. Here we just received electricity, even though power cuts are frequent," said the former teacher. "There is progress, but it's very slow."

Her neighbour Mariano Pereira is a farmer, like 80 percent of the working population. "It is difficult to find food. I have no good job to earn money, only farming. It is barely enough to feed my family. We can't afford to sell our products, we don't produce enough," Pereira lamented.

The guerrilla war against Portuguese colonisers who left in 1975, and the conflict triggered by the 1975-1999 Indonesian occupation that followed, destroyed the economy of this half-island nation.

Despite more than $1.5 billion poured into the country by international donors between 1999 and 2011, according to official figures, almost half of the 1.1 million population still lives below the international poverty line.

New President Taur Matan Ruak, a former guerrilla leader who was elected separately to the parliament that is being chosen on Saturday, has promised to tackle poverty and reduce unemployment, which runs at 20 percent.

"We must invest in favour of trade, infrastructure and education... (and) we need to create development centres outside major urban centres," he said in an interview with AFP.

In Dili, the presidential palace and a few government buildings built with Chinese funding are nearly the only visible signs of development.

Despite international aid, agricultural productivity remains one of the lowest in Asia. This year, the UN's Food and Agriculture Organization is increasing cereal imports by 9 percent. "The agriculture sector needs to be tremendously increased and valued," said Charles Scheiner of the non-governmental group La'o Hamutuk.

Promising oil and gas reserves have raised hopes of an economic boom that has yet to materialise, while energy revenues have already become the lifeblood of the economy, contributing to more than 90 percent of state funding.

"The core of the economy should focus on the production of simple things – water, candles, cigarettes, beer – for local consumption," said Scheiner. "But unfortunately, that is not very glamorous. The government would much rather dream about oil refineries, which is going to drain what is left of the oil money and leave the people with nothing," he said.

The International Monetary Fund (IMF) calls East Timor the "most oil-dependent economy in the world".

In 2011, the government launched a Strategic Development Plan to improve infrastructure, education, healthcare and training by 2030. But the IMF has recommended moderate investment projects in the short term, fearing a faster pace would feed inflation and squeeze the poor even more.

Of the two leading parties contesting Saturday's parliamentary election, the left-wing Fretilin party has a populist platform for spending the oil money to lift income and education levels.

But the centre-left National Congress for Timorese Reconstruction would prefer a plan for longer-term investment on major infrastructure projects.