East Timor could become failed state, aid agency says

East Timor could become failed state, aid agency says

Reuters Canberra, Dili

East Timor, the world's newest nation, is in danger of becoming a failed state because Australia is dragging its feet on maritime border talks and hindering the development of its neighbor, aid agency Oxfam said on Thursday.

An Oxfam report released to coincide with East Timor's second anniversary of independence showed less than half the nation's 760,000 people could read or write, 41 percent live below the poverty line and one in 10 children die before the age of five.

Australia and East Timor are negotiating a border in the resource-rich Timor Sea. At stake are billions of dollars worth of oil and gas royalties, which East Timor has vowed to use to alleviate poverty, create jobs and improve education.

"Two years after independence, the Australian government's approach to maritime boundary negotiations with East Timor is limiting East Timor's capacity to plan for and finance its future development," Oxfam and Australian arm Community Aid Abroad said.

"This could push newly independent East Timor to the brink of becoming a failed state through no fault of its own," it said.

Australia has said it is only able to meet East Timor twice a year, but East Timor wants monthly meetings in a bid to accelerate maritime border talks that began last month in the East Timor capital Dili. The next meeting is set for September.

"We will continue to forge better relations with Australia but we will not have to sacrifice our interests for this," President Xanana Gusmao said in his speech in a veiled reference to the dispute.

At the heart of the dispute are billions of dollars worth of royalties from oil and gas reserves which lie in the waters between Australia and East Timor.

"We want to affirm here that we continue to firmly revindicate, only, what according to international law we can admit or conclude to be ours. It is not our intention to claim more than one gram or one millimeter of what does not belong to us," Gusmao said.

Defying the scorching sun, some 1,000 East Timorese rallied inside a football stadium in the seaside capital Dili during the subdued celebration.

Newly formed East Timorese police and troops, marched around the field, a day after assuming full responsibility over security in territory, which spans half an island.

Dozens of machete-wielding tribal chiefs, clad in bright yellow shirts and red headbands, also marched across the stadium as bystanders decked out in traditional costumes cheered the procession.

Australia denies claims it is cheating East Timor out of A$1 million (US$700,000) a day in disputed oil and gas royalties and says it has been more than generous to its tiny neighbor by giving it 90 percent of royalties from a joint development area.

A year ago the two countries agreed to a revenue sharing Timor Sea Treaty for a shared 62,000 square-km region that splits royalties 90:10 in favor of East Timor until a permanent maritime boundary is negotiated.

East Timor, which gained independence in 2002 after a quarter of a century of often brutal Indonesian rule, wants negotiations on a maritime border completed in three to five years. Australia has refused to put a deadline on an agreement.

"They've made a very big mistake thinking the best way to handle this negotiation is by trying to shame Australia, by mounting abuse on our country, accusing us of bullying, when you consider all we've done for East Timor," Australia's Foreign Minister Alexander Downer told Australian television recently.

"We will do what we believe to be right but, of course, in our interests," he said.

East Timor can claim a sea boundary 200 nautical miles (370 km) from its coast, consistent with its entitlement under international law and the U.N. Convention on the Law of the Sea.

But Australia can also claim a boundary 200 nautical miles from its coast. At the closest point, the countries are about 230 nautical miles apart.

Timor Sea gas fields include the $3.3 billion ConocoPhillips- operated Bayu-Undan project and the $5 billion Woodside Petroleum-run Greater Sunrise venture.