No rupiah please, this is a free East Timor

No rupiah please, this is a free East Timor

Sinurana de Yesus, a roadside trader of basic commodities,
answered every question posed to her by an Indonesian reporter
for a Dutch radio station.

Then came the best question, "Do you accept rupiah as legal
tender?"

"No. The rupiah is worthless because all the Indonesians have
fled for good," replied the tough-talking de Yesus.

The trader was obviously not joking, although her spontaneous
reply made the crowding bystanders burst into laughter.

She was right. The rupiah has disappeared along with the "ex-
colonialist" Indonesians.

"The U.S. dollar is better because it is stronger and we are
proud of it," de Yesus insisted.

The Indonesian currency, however, is still traded in money
changers at a fixed price of US$1 for every Rp 10,000.

The choice of American dollar as the official currency since
East Timor became independent had been a difficult choice.
Nobody, though, knows for sure if the country will have its own
currency some time in the future when it is economically strong
enough.

The decision was taken at a time when the newly-born state had
yet to establish its central bank.

"Ramos Horta (now the foreign minister) managed to convince
lawmakers that the U.S. dollar was the best choice for a country
which is yet to have a monetary system," Legislator Jacob Xavier
told The Jakarta Post, recalling a debate on the official
currency.

Xavier, a legislator from the Timor People's Party (PPT), was
one of the politicians who proposed the Portuguese currency.

To use a foreign currency at this point in time is a wiser
decision for East Timor than printing its own money. The biggest
concern is if the country had its own currency now would it have
any value on the international market.

"Until we have a monetary system, central bank and a sound
economy, we'd better have the U.S. dollar for better or worse,"
said Helder da Costa, director of the National Research Center,
which is attached to the University of East Timor.

"With the dollar, we don't have to worry about convertibility
and supply." he told The Jakarta Post.

But the use of the U.S. dollar also brings its own curse. The
greenback makes exports uncompetitive while imports become
expensive; labor costs soar and tourism becomes unattractive
because potential visitors are discouraged by the expensive
transport system and costly facilities.

"So if people in Darwin had the choice between spending $700
for a return ticket to Dili, Bali or New Caledonia, they are
likely to skip Dili for obvious reasons, said da Costa.

East Timor's leaders cherish the hope for their own currency
some day when the state economy will be viable and has a
reasonable bargaining position on the international market.

The constitution stops short of explicitly stating the
official currency. The chapter dealing with the monetary and
taxing system requires the government to establish a Central
Bank, which has the "exclusive right to issue the national
currency".

For the common people like de Yesus, who are of course unaware
of the negative consequences and the worry shared by observers,
the dollar still means good value.

"With only $5 you can buy things worth Rp 50,000." she said,
laughing. --JP