East Timor separation good for Indonesia

JAKARTA (JP): The separation of East Timor from Indonesia will make a positive rather than negative impact to the country's economy, economists said on Saturday.

Didin Damanhudi, an economist from the Bogor Agricultural University, said that the separation would mean a significant cut in the government's budgetary spending to the province.

"The government's national spending budget will be relieved by about Rp 1 trillion (about US$130 million) per year if East Timor separates from us," he said.

The United Nations announced on Saturday that the vast majority of East Timorese voted in favour of breaking away from nearly a quarter century under Indonesian rule.

The steps to follow the announcement of the result were laid down in an agreement signed by Indonesia and Portugal in New York on May 5.

Didin said that Indonesia did not gain any economical benefit from the integration of East Timor in 1975, but politically its reputation in the international forum had been at its expense.

He suggested the government allocate the spending budget fund for the outgoing province be used instead to help East Timorese who might opt to leave following the result of the referendum.

Economist Umar Juoro shared the same view and said that the separation of East Timor would make a strong impact on Indonesia economically and politically as long as the government could maintain security and social stability in the troubled province until the People's Consultative Assembly in November.

The November meeting will be scheduled to ratify the separation of East Timor.

Touching on the Timor Gap -- an area between Indonesia and Australia (Timor Sea) which some have said to be rich in energy sources, but is mostly undeveloped -- Umar said that the area was not feasible for development.

"The Timor Gap will not yield any significant economic value, therefore, there is nothing to lose if East Timor goes," he said.

He added that the overall assets Indonesia invested in East Timor were not that significant in value.

Didin shared the same opinion with Umar on the Timor Gap and commented that trying to develop any mining facility there would drain any budget fund.

"The cost of exploitation in Timor Gap is greater than what it could give you in return," he said.

The Timor Gap is divided into three areas and has rules allowing for the exploration and development of petroleum resources.

Area B is at the southern end of the Timor Gap and is administered by Australia, with Indonesia entitled to part of the tax collected from oil production.

Area C, at the northern end, is administered by Indonesia and Australia is entitled to a share of taxes collected from oil production.

Area A is jointly administered with a sharing of taxes collected.

An agreement over taxes from natural gas production from the Timor Gap has not yet been finalized.

The major company operating in the Timor Gap is the Phillips Petroleum Co. of the U.S. through its not yet developed Bayu- Undan gas/condensate project and other activities. Other stakeholders in the Timor Gap include Royal Dutch/Shell Group and Australia's Woodside Petroleum Ltd.

There are about 27 companies in all that have spent hundreds of millions of U.S. dollars on exploration and development in the location. (udi)