East Timor seeks US$90 million for first budget
East Timor seeks US$90 million for first budget
Bronwyn Curran, Agence France-Presse, Dili
East Timor bids farewell to almost 500 years of foreign rule
on May 20 -- but not to foreign aid.
At two-day talks starting here Tuesday 25 bilateral and
multilateral donors will be asked to pledge US$90 million to plug
the new nation's deficit for the next three years and prop up its
nascent economy.
"East Timor really needs continued engagement from donors at
this critical point of the independence handover," warned Sarah
Cliff, the East Timor country director for the World Bank, which
is co-chairing the talks with the United Nations and East Timor's
transitional government.
The half-island state is one of the poorest in the region and
will have to wait until mid-decade to fully fund its own budget.
It is only in the fiscal year 2005-2006 that tax revenues from
oil and gas development in the Timor Sea will be high enough to
cover core government spending.
The former Portuguese colony and Indonesian province is
struggling to recover from the decimation of 80 percent of its
infrastructure in the vengeful Indonesian army-backed militia
rampage that followed its August 1999 vote for independence.
It faces the loss of a major source of economic activity with
the exodus of hundreds of foreign workers. The UN, which has been
running East Timor since October 1999, is scaling back its
civilian presence to 100 from an original 1,300, and downsizing
foreign peacekeepers from 8,000 to some 5,000.
The deflation of the bubble economy that was propelled by
foreigners' demands for hotels, restaurants and transport has
left the economic outlook grim after two years of giddy growth as
high as 18 percent, and rendered donor support vital.
Nevertheless the $90 million request is far lower than the
$150 million deficit predicted at the last donors' conference in
Oslo in December.
Total government spending for the first three years is set at
$256 million. East Timor's infant economy can cover $166 million
of that, but it is relying entirely on tax revenues -- from
imports, income, utilities and facilities like ports -- to do so.
But while oil and gas treasures beneath the Timor Sea glimmer
with the prospect of self-funding for the world's newest state,
they will not be enough to eliminate aid dependency.
"In 2005-6 East Timor should have sufficient revenues to cover
its core budget but it will still be poor," Cliff told AFP.
Energy resources mean East Timor can "afford a strong strategy
in education, health and development infrastructure," but not
long-term poverty reduction, Cliff said.
Small-scale industry and tourism are the kind of non-oil and
gas sectors which Dili should focus on for long-term development,
Cliff added.
There are no state-owned enterprises for the time being and
tax collectors are keeping their hands off the main export crop,
coffee.
The World Bank is counting on donors, who backed East Timor to
the tune of $300 million last financial year, to stay engaged "to
ensure gains in economic and social recovery are maintained and
continued," Cliff said.
The International Monetary Fund, the Asian Development Bank,
UN agencies and major country donors like Japan, Australia, the
United States and European nations will take part in the talks.