East Timor separation good for Indonesia
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)