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Chinese cash: Enough to keep East Timor out of Asean?

South China Morning Post - August 4, 2019

Meaghan Tobin – When work began on East Timor's US$490 million deep water port, things went with a bang – literally.

The government waived its regulations on explosions so that Chinese contractors could blast their way through a quarry in Tibar Bay, 10km west of the capital city of Dili, and launch in earnest a project aimed at strengthening trade links between Southeast Asia's youngest nation and the wider region.

To some ears, those explosions in mid-July were a sign of strength, a celebration of the fact that Asia's largest economy was helping to develop one of its smallest and most impoverished neighbours. To other ears, they were a loud reminder of a young country's vulnerability.

The Tibar Bay port, which has been designed to handle 750,000 containers annually, is among 20 projects being built by Chinese state-owned firms in the country. East Timor has turned to China for help in developing its economy and infrastructure – two weak points that have in the past held it back from joining the region's premier multilateral forum, Asean (the Association of Southeast Asian Nations).

The country has been hoping to join the bloc since gaining independence from Indonesia in 2002, making an official application for membership in 2011, and is today the only Southeast Asian nation that is not a member. Joining would not only boost its opportunities for trade, but also symbolise the 17-year-old nation's coming of age – from occupied state to regional player.

Yet observers warn that in pivoting to China, East Timor may have given the bloc one more reason to exclude it. Previously, doubters in Asean – most vocally, Singapore – have suggested the country's struggles with its economy and infrastructure would leave it at best unable to contribute, and, at worst, a drain on resources. Now they fear its would-be 11th member could act as a Trojan horse for Chinese influence.

All that leaves East Timor with a Catch-22-style riddle: to join Asean it needs to improve its economy, but, in improving its economy, it could jeopardise its chances of joining Asean.

A Trojan horse?

China's ambassador to East Timor Xiao Jianguo, who attended the quarry-blasting ceremony, did little to assuage those fears a week later, when he said Beijing "as a good neighbour, good friend and good partner" supported East Timor's bid to become Asean's 11th member.

Beijing was willing to assist East Timor "in terms of human resources training and facilities development" to address Asean members' concerns about East Timor's suitability for membership, said the ambassador.

He added that the country's "accession to Asean" would "help build a higher level of China-Asean strategic partnership".

Analysts say such comments will have raised alarm bells in some Asean member states, who fear that admitting a nation beholden to China for economic support will jeopardise its consensus-driven model.

Maria Ortuoste, a former analyst for the Philippines foreign service, said the bloc was still wary of the divisions caused by China's activities in the South China Sea, citing Asean summits where communiques had been delayed because Cambodia and Laos – seemingly under the influence of China – had failed to toe the group's line on the issue.

"China has not been shy about flexing its muscles," said Ortuoste, now associate professor of political science at California State University East Bay.

Help needed

That East Timor's economy is in need of the help is in little doubt. Until 2015, oil and gas revenues had driven the economy, but the state now depends on returns from its sovereign wealth fund investments to stay afloat.According to the local NGO La'o Hamutuk, which monitors the nation's economic development, the fund has stagnated at US$16 billion for the past four years. To grow the fund, the country could tap its remaining gas field, known as Greater Sunrise, but to do so it would have to cover capital costs that La'o Hamutuk estimates would drain the remainder of the fund.

On top of that, its population is one of the youngest in the world – the median age of its 1.3 million people is 19 and some estimates put youth unemployment as high as 40 per cent.

Given such problems, there are many voices even within Asean that see it as only reasonable that it should seek Chinese investment. Indeed, some argue that such investment is exactly what is needed to bring its economy in line with the rest of the bloc.

While the former occupying power Indonesia has long championed East Timor's inclusion in Asean, officials in Malaysia, Brunei and the Philippines, historically part of the Singapore-led coalition opposing East Timor's inclusion, have also recently voiced support.

The change in attitudes may be in part due to East Timor's increased efforts to engage with Asean officials and establish diplomatic missions in every member state, a requirement for membership.

"After eight years, momentum is now clearly building for admission," Ambassador Jorge Trindade Neves de Camoes, director general for Asean affairs at East Timor's ministry of foreign affairs, told the South China Morning Post, adding that objections to the nation's membership were "outdated".

Chinese influence

However Asean members view the country's relationship with Beijing, East Timor may feel it cannot afford to be choosy when it comes to investors.

China has already donated military and government facilities and built much of the nation's major transportation infrastructure and East Timor is now said to be seeking China's support in tapping its oil and gas resources, the main source of its income.

These economic links have not sprung up suddenly. China has been a critical economic partner since it became the first nation to recognise East Timor's independence in 2002.

Former president Jose Ramos-Horta told the South China Morning Post in November that China had donated the buildings for the nation's foreign and defence ministries and presidential office and had provided annual multimillion-dollar grants to the nation. East Timor was accepted as a member of the Beijing-backed Asian Infrastructure Investment Bank in 2017.

Among the projects backed by Chinese state-owned firms are a high-voltage power grid already in operation, a highway connecting cities along the southern coast, and, of course, the Tibar Port – projects that Xiao the ambassador termed "one network, one road, one port", a play on Beijing's description of its regional Belt and Road infrastructure initiative (sometimes referred to as "One belt, one road").

These projects are part of a national infrastructure drive centred on the Tasi Mane project, which East Timor's government hopes will transform the island's southern coast into an industrialised petroleum-processing hub.

Many analysts believed the Tasi Mane project would be "a watershed and touchstone of China-Timor-Leste bilateral relations", said Tao Duanfang, an analyst at the Centre for China and Globalisation in Beijing, using the Portuguese term for the country. Tao said the government hoped large-scale projects such as this would solve the problem of high youth unemployment.

There is little to suggest the country can wean itself off Chinese cash any time soon. Indonesia's ambassador Sahat Sitorus told The Jakarta Post this month that while his country remained a big investor in East Timor, Chinese companies had recently been making offers on infrastructure projects that Indonesian firms just could not match.

It's not all about China

But the reticence of some Asean nations to let the fledgling nation into the bloc goes deeper than fears of China's influence. Some question East Timor's ability to succeed as an independent state.

Camoes at the ministry of foreign affairs said East Timor had been struggling with the "nitty-gritty issues of statehood". The nation was a colony of Portugal for nearly three centuries before the political group Fretilin declared its independence in 1975. It was then occupied by Indonesia, which ruled it as a province until the United Nations intervened to restore its independence in 2002.

While it successfully held a peaceful presidential election in 2017, the nation still struggles with incomplete legislation, corruption and inadequate regulation, according to investment watchdog Fitch Solutions, which ranks East Timor as one of Asia's riskiest bets politically and economically.

According to Fitch, it is bottom of the table in Asia in terms of short-term political risk and beats only North Korea, Laos and Mongolia in long-term economic risk.

Analysts say some of the concerns voiced by Asean members – such as that the young state might not be able to handle the sustained level of diplomatic engagement required for membership – are actually grounded in a lack of confidence in the state's future and worries over whether East Timor can succeed, economically or politically.

"Asean states' objections are not just about China's influence," said Bec Strating, senior lecturer in politics and international relations at La Trobe University in Melbourne. "They're also about whether or not East Timor will struggle in the future. There's a lot of economic uncertainty about its prospects."

Dragging it out

Asean is unlikely to reject outright East Timor's bid for membership, experts say; it is more likely to allow the process to drag on indefinitely.

Former Asean secretary general and Singapore ambassador Ong Keng Yong said East Timor would need the backing of all 10 member states to join the group, as any decision would require consensus.

"Asean membership demands a very heavy responsibility," said Ong. "It will consume lots of resources and time. What this means is that Timor will have to find a balance between domestic priorities and commitments to Asean."

The bloc has commissioned multiple studies on the feasibility of East Timor's membership, which will include an inspection tour by Asean officials in Dili in September or October. Camoes and other East Timor officials are quick to point out that the nation was a de facto member of Asean for 24 years when it was under Indonesian administration.

But even if opposition to its entry can be overcome, some experts say it is unclear how the bloc would benefit from including the young nation.

"Looking at the broad range of issues Asean faces in terms of economics, defence, what role is Timor-Leste going to be able to play?" asked Natalie Sambhi, director of Verve Research at the Perth US Asia Centre. "Consensus is already difficult to achieve."

The outsiders

Complicating matters are the enduring issues in one of East Timor's most significant diplomatic relationships.

Australia, which is East Timor's biggest aid donor, stands accused of siphoning off revenue from gas fields that legally belong to its far smaller neighbour. Australian officials have been accused of using espionage tactics to influence negotiations over the maritime boundary between them – a boundary that Australia's parliament moved to ratify on Tuesday, more than a year after the treaty was concluded.

While Australia is not the only major donor to East Timor – neighbouring Indonesia is also a vital source of economic support and educational exchange, despite the two nations' acrimonious past – some Asean member see the country's reliance on aid as highlighting its vulnerability to outside influence.

"Part of the rationale for Asean's creation is being able to control space," said Strating at La Trobe University. "Letting in vulnerable actors also potentially raises the risk for interference from outside influences – not just China, but also Australia, the US."

Riddle for Asean

While all of this may leave East Timor with seemingly irreconcilable objectives in trying to court both China and its Southeast Asian neighbours, there is little to suggest the young nation is about to distance itself from its larger benefactor. If anything, there are signs the two are getting closer.

As Indonesian ambassador Sahat noted in his recent interview with local media, there has been speculation that East Timor will enlist China's help in developing a US$1 billion port in the southern coastal city of Beaco.

Doing so, warned the ambassador, would risk the country ending up like Sri Lanka, where China has been accused of using "debt diplomacy" – extending loans it knew could not be repaid – to take control of the Hambantota port. "If China wants to expand, no one can prevent it from building a military base [in Beaco]," said Sahat.

Such a scenario would pose Asean with a riddle of its own. In blocking its would-be 11th member from joining, it risks bringing about the very situation it fears most: an expansion of Beijing's influence in Southeast Asia.

Source: https://www.scmp.com/print/week-asia/geopolitics/article/3021219/chinese-cash-enough-keep-east-timor-out-asean