Michael Leach – After a year of upheaval, Timor-Leste politics entered 2021 in an interesting place. Alliances between the major parties have been reconfigured and a rising generation of small parties is generating new pressures. Still unresolved, meanwhile, is the future management of the maritime oilfields, vital to the nation's economic future.
Last year had started badly for the government of Jose Maria Vasconcelos, popularly known as Taur Matan Ruak, whose annual national budget was defeated in January by his own alliance partner, Xanana Gusmao's National Congress for Timorese Reconstruction, or CNRT. But Ruak, a one-time defence force commander, managed to hold on to government after the opposition Fretilin seized the moment and supported his government in parliament.
By May the president, Fretilin's Francisco "Lu-Olo" Guterres, had helped broker a new parliamentary understanding, the result of which was a remodelled government with the CNRT in opposition. The new government brought together Fretilin, the youth-oriented KHUNTO and Ruak's small People's Liberation Party. Fretilin took over a number of key ministries from departing CNRT figures.
The CNRT's parliamentary protests and legal challenges to the constitutionality of the remodelled government – and the decisions of President Guterres – came to little. Although partisan tensions are still elevated, Dili remains calm, as the government continues to deal successfully with the threat of Covid-19.
Under the new coalition arrangements, Xanana Gusmao is out of power for the first time since 2007, apart from the term of the short-lived Fretilin minority government in 2017-18. Behind the scenes, Fretilin leader Mari Alkatiri appears to have outplayed the old master in this latest round of their post-independence tussle. Never to be underestimated, the third of the major historical leaders, Jose Ramos-Horta, appears to have informally aligned with Gusmao, a partnership that could see a bid by Ramos-Horta to return to the presidency in 2022.
For his part, Gusmao is spending his time party-building – something the CNRT, a classic "party of power" based on Gusmao's charismatic legitimacy, has neglected since its foundation in 2007. Much effort is going into recruiting support within the powerful Catholic Church and building up district party structures, though the party still lacks a clear second line of leadership.
Controversially, Gusmao appeared publicly at the birthday in January of alleged paedophile priest Richard Daschbach, a move condemned by his former wife Kirsty Sword-Gusmao and their three sons as lacking sympathy for the victims of sexual abuse and potentially prejudicing a forthcoming trial. Some local commentators believe Gusmao sees potential political payoffs from elements of the Church hierarchy in dampening down the Daschbach case, which some Church figures fear may generate a larger number of historical sexual abuse cases. Daschbach was defrocked by the Pope last year in a move publicly supported by the Timorese bishops.
These elite tussles have worn thin, though, with the nation facing a possible end within a decade to the oil wealth that finances national budgets. Little progress has been made towards diversifying the economy, meaning the lack of a national consensus over the management of natural resources could undermine Timor-Leste's long-term economic viability. A determined consensus-building effort will be needed to ensure the government can sustain the income stream from its offshore oil and gas domains.
By most estimates, Timor-Leste's sovereign wealth petroleum fund will need to find new revenue by 2030 to support annual budgets of the size the nation has become accustomed to. (On average, outlays have been increasing by 11 per cent per year.) Despite the prospect of increased revenue from Santos's lease in the existing Bayu-Undan fields in Timor-Leste's maritime zone, the development of the untapped Greater Sunrise oil and gas field remains unresolved.
Political developments during 2020 created a sense of policy limbo. The Tasi Mane oil and gas processing megaproject on Timor's south coast, centrepiece of the National Strategic Development Plan – long championed by Gusmao – is now under a cloud, with Gusmao in opposition. In the run-up to the next election in 2023 (by which time Gusmao will be seventy-seven), the question of the new government's policies towards Greater Sunrise will loom large.
So far, the messages coming out of the remodelled government and its new executive have been mixed. While prime minister Ruak recently reiterated his support for Tasi Mane, other members of the executive, including the new petroleum minister, Vitor da Conceicao Soares, have qualified their support for the plan by emphasising the need for independent feasibility studies. The government has also replaced longstanding leaders of the National Petroleum and Minerals Authority and the national oil company, Timor GAP, figures who were instrumental to articulating the CNRT's visions for the industry.
While the Gusmao-led governments promised far larger revenue streams than would be received by downstream processing in Australia, the call for feasibility studies has the backing of a number of independent analysts. La'o Hamutuk, a prominent non-government organisation, argues that the "risks, benefits and costs" of downstream processing "have not been seriously analysed." Illustrating the problem, the 2021 budget proposes to draw down the petroleum fund by around US$830 million more than its sustainable income level, a practice only viable for another ten years on current estimates.
Parliament's powerful public finance committee has openly questioned the logic of some of the large transfers to megaprojects in this year's budget, given that spending to tackle other problems, including continuing lack of access to safe drinking water in some communities, has suffered correspondingly.
La'o Hamutuk has warned of insufficient spending on the government's stated priority areas of healthcare, education, water and agriculture, which together account for 18 per cent of the 2021 budget. This has been a common criticism over the years, and La'o Hamutuk notes the contradiction between the call for feasibility studies and the continuing allocations to organisations like the oil and gas company Timor GAP, which will receive around US$70 million during 2021.
For the government, time is ticking by. Gusmao, the great survivor, could resume power at the next parliamentary elections, in 2023, this time with a friendly president. With the presidential election due in May next year, Ruak and his colleagues may have as few as eighteen months with a president as supportive as Fretilin's Lu-Olo.
But a Gusmao victory is no longer the certainty it once was. While he has proved a master coalition-builder over the years, the 30 per cent core support base of his main opponent, Fretilin, is also a powerful basis for alliances, and the party appears to be improving its negotiating abilities. It shouldn't be assumed that the current government is merely a placeholder for the return of Gusmao.
Last year's change of government therefore raises a much larger issue for Timor-Leste as a whole. With the future of the national economy at stake, and with the CNRT out of power for now, many would argue it is time for a cross-party consensus on the management of the state's key untapped resource wealth – or at least an updated debate over the various options for development.
While this may seem a pipe-dream given the political rifts, and it would require technical support, parliament is well placed to conduct an inquiry to establish a cross-party foundation for resources policy. The operations of Timor GAP have now been referred to the National Audit Office, what is at stake is far more than a technical matter.
The options confronting government are difficult ones and go to the heart of how Timor-Leste's major non-renewable asset is managed. Does the government proceed with the existing Tasi Mane vision, or a stripped-back version? Does it backfill the oil and gas to Darwin, leading to far lower costs to the state, but potentially lower revenues? Or are there other more innovative options that take note of the global shift away from fossil fuels? Could Timor-Leste pioneer ways of being paid for not exploiting the Greater Sunrise resource?
The nationalist politics of this issue, tied up with the now-resolved issue of maritime boundaries with Australia, remain potent, despite Gusmao's move to opposition. While the successful maritime boundary campaign was a powerful nationalist totem, the future management of oil and gas in Greater Sunrise was always a separate issue, with various development schemes still allowable under the terms of the border treaty.
Meanwhile, the sense of political change has been highlighted by the rise of new smaller parties. Rumours suggest that the outlawed martial arts group PSHT may seek to replicate the success of KHUNTO, which was founded by a key leader of the martial arts group Kork. Gregorio Saldanha, the leader of the student protests that preceded the Santa Cruz massacre in 1991 – the event that brought the struggle for independence from Indonesia back to the world's attention – is planning a new party, Partifor. Saldanha's party could further undermine the support base of the Democratic Party, which relies on the allegiance of many of that generation of independence activists. There is also talk of a new Green party.
In other words, East Timorese politics is in flux, and the next elections could see shifts among the minor players needed for parliamentary majorities. Many might see this as good reason for Timor-Leste's major political forces to come together over the core economic issue facing the nation and start to plan the next ten years together.
– An earlier version of this article appeared in Asialink Insights.