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China in East Timor; concern in Indonesia and Australia

Nikkei Asian Review - August 26, 2017

Jun Suzuki, Dili – China is increasing its influence in East Timor as the small Southeast Asian nation's relations with its traditional aid providers weaken.

East Timor gained its independence in 2002 and has since received assistance from Japan, the U.S. and Australia. Recently, however, it has been on a collision course with Australia over the development of natural resources, and its ties with Japan and the U.S. are fraying.

China is making overtures to East Timor through the Asian Infrastructure Investment Bank, a new multinational lender that it spearheaded.

Now Chinese and East Timorese companies are building homes, commercial facilities, schools and other structures on 10 hectares here in the capital. The project will cost $60 million. A Chinese supervisor on the construction site was instructing local laborers on how to build walls for homes when the Nikkei Asian Review recently visited.

Across the border in Indonesia, people are wary of China's economic advancement and are unfriendly to Chinese workers. But there is no such atmosphere in East Timor.

The country sees China as an old friend and welcomes its assistance, said Xanana Gusmao, the country's independence hero and de facto leader, who currently serves as minister of planning and strategic investment. He was also the country's fifth prime minister.

East Timor has come to rely on China due to rifts created in its relations with its traditional aid providers. In particular, East Timor and Australia are growing antagonistic over the development of a large gas field and other problems.

In January, East Timor decided to tear up a treaty with Australia that called for looking into joint oil and gas exploration in the Timor Sea. It also called for putting off drawing a demarcation line in the sea between the two countries. East Timor now intends to set maritime borders with Australia through international arbitration and explore ocean resources on its own.

East Timor depends on oil and gas for 90% of its national revenue. But as existing oil fields are expected to run dry within several years, the country is stepping up efforts to develop alternative industries with the help of foreign capital. It is pushing ahead with road, harbor, airport and other basic infrastructure improvements to attract investment from abroad.

Even if East Timor cannot receive support from Japan and the U.S., "obviously, there is an alternative," said former President Jose Ramos-Horta, a recipient of the Nobel Peace Prize. "The alternative today is always China." Ramos-Horta made the comment during an Australian television program broadcast in May.

In return for Chinese cash, East Timor is throwing its support behind China's Belt and Road project, a reimagination of the old Silk Road trade route.

In East Timor's parliamentary election in July, the Revolutionary Front for an Independent East Timor, or Fretilin, the second largest party before the poll, emerged as the biggest winner, narrowly beating the National Congress for Timorese Reconstruction, or CNRT, headed by Gusmao. Neither party, though, won a majority of parliament's seats, and negotiations on a coalition government are underway.

But the country's foreign policy is unlikely to show any major change regardless of whether Fretilin or the CNRT controls the government.

East Timor sits at a geopolitically strategic point, between the Pacific and Indian oceans, and neighbors fear China will boost its presence in the country not only economically but also militarily. These are not unfounded fears – Chinese warships paid their first visit to Dili last year.

As such, Indonesia and Australia will be paying keen attention as their young neighbor grows up.

Source: https://asia.nikkei.com/Politics-Economy/Policy-Politics/China-in-East-Timor-concern-in-Indonesia-and-Australia