Can East Timor fulfill its Developmental Vision 2020?

“East Timor predicted to be one of the top ten fastest growing economies for 2011.” (Tempo Semanal, 2011). That news comes as the World Bank recently predicted a 15 percent growth rate and a decline in poverty by 9 percent in the foreseeable future  .

Since achieving independence in 2002, and guided by its National Development Plan (NDP), East Timor has made modest progress. But, the latest predictions are seen by many as the beginning of a new journey of development. From Vision 2020:

Timorese will actively participate in economic, social and political development, promoting social equality and national unity. Good roads, transport, electricity, and communications in the towns and villages in all regions of the country will reduce isolation. Production and employment will increase in all sectors;  agriculture, fisheries and forestry.

Based on sound management and sustainable utilization of natural resources, the living standards and services will improve for all Timorese, income will be fairly distributed, prices will be stable and food supplies secure. The economy and finances of the state will be managed efficiently, transparently and be free from corruption. The state will be based on the rule of law. Government, private sector and community leaders will be fully responsible to those who chose or elected them.

A fulfilment of that vision would make East Timor economically self-sufficient by 2020 with a population lifted out of poverty as it gains access to health and education and enjoys a higher per capita income.

Over the past nine years, achievements have been made in many sectors. Schools and hospitals both in the capital and the districts have been rebuilt and many government institutions for delivering goods and services have been put in place.

Markets have been opened around the country. The policy of providing direct cash transfer into the communities under the coalition government has stimulated rural economies. Loans provided by the macro finance bank helped many local businesses to thrive.  The ability of the government to maintain peace and stability has helped the country to stay on its development path - despite facing a brief security crisis in 2006.

Following the 2006 security crisis, East-Timor has enjoyed a relative degree of stability which has enabled the country to move forward. Many unresolved issues such as the compensation of the former veterans and petitioners have been completed. The closing of Internal Displaced Camps towards the beginning of 2009 marked the end of a long-running conflict emanating from the 2006 crisis.

But, there are many challenges ahead. Major infrastructure such as roads, housing, power and telephone remain underdeveloped - as does the agricultural sector. The current lack of transparency and accountability generates corruption which contributes to the undermining of the country’s developmental goals set out in its NPD.

The national road network linking the capital city of Dili with most of the districts is poorly maintained and damaged by landslides and torrential rain. It takes several hours to travel from the capital to the nearest districts. Consequently, operating costs rise, rural villages are disconnected from the city and farmers are not able to transport their agricultural products to market.

Last year, a week of heavy rain cut the main road linking the capital city and the districts of Ainaro, Same and Suai. It took about two weeks to repair the damage. The road is notorious for accidents. In 2008 the East-Timor National Police reported 1,656 road accidents. Sixty percent of all reported accidents are attributed to human error, 25 percent to road conditions, 10 percent to the weather and five percent to mechanical failure. (Asian Development Bank, 2009).

The government’s failure to execute the road rehabilitation projects further exacerbates the problem. Ninety percent of projects are believed to have failed to deliver on the promise. The government must now find ways to invest in road construction as failure to do so will further undermine the country’s ability to attract foreign investments needed to create jobs and encourage economic growth.

Housing is another major issue. Unregulated property ownership creates tension in communities. Each year, more people move to the city in search of jobs and other economic opportunities. Population increases, together with a large population of UN personnel, pushes up house prices beyond the reach of those who have to settle for slums.

The competition for housing can generate conflict amongst the residents and also with the state authority. City residents occupying government properties constantly face evictions from the government. This year, in the city suburb of Bairro-Pite, about 1000 squatters were forcibly evicted by the government without proper compensation (East Timor Law and Justice bulletin, 2009). The lack of a proper policy to address the compensation issue has left many residents in limbo.

In many rural villages, access to clean water, electricity, roads and income generation is still a major challenge. Most people rely on government subsidies and assistance from non-government organizations.  

Telecommunication is another issue. The World Bank (2007) noted that East Timor currently has the most expensive telecommunication costs in the world. Only five percent of citizens, most of them living in the capital, have access to basic telephone or data services. For those who can access the internet, it is costly and limited in capacity. Even though the network coverage has been improved across the country, accessing the internet and telephone are still too expensive for most people.

Besides problems in the agricultural sector, all basic manufactured commodities such as building materials and household consumables are imported from overseas.  The United Nations Food and Agricultural Organization (FAO) estimated that in 2007/08, East-Timor received 6000 tons of food aid annually, This has increased to 119,000 tons since the major food crisis hit in 2008.  

Heavy reliance on imports has increased the general inflation in Dili to 6.6 percent in the year to June - and with food costs inflating to around 8.5 percent over the same period (World Bank, 2010). Despite some improvement in the agricultural sector, production is not sufficient to feed the population. Many people living in rural areas constantly face malnutrition and hunger.

There are a number of factors that hamper the government’s efforts to address some of these challenges:

First, there is a lack of competent civil servants to plan, coordinate and implement the government programs - and most key positions are dominated by the members of the ruling coalition parties who are not selected on merit, but rather through party’s nomination.  

Furthermore, a reluctance to work in government leaves a shortage of knowledgeable workers there. The government then hires from overseas, people on exorbitant salaries. Most newly qualified East Timorese graduates seek jobs in foreign agencies - such as the United Nations, World Bank, AusAID, US Aid and others.

Second, there is major corruption.  Lack of effective supervision of government programs resulted in the misuse of funding.  Ninety percent of the budget is funded by oil revenues - and the 2011 state budget stands at over 1 billion American dollars. The government promises that the money will be particularly used to provide employment opportunities, education and training opportunities, continued cash transfers for the most vulnerable and increasing food security measures.

Though such increase is welcome, a failure to effectively control the budget would result in corruption and misappropriation due to a lack of transparency and accountability. So far the Commission of Anti-Corruption (CAC) has yet to prosecute any official charged with corruption.

 A draft United Nations Human Development Report 2010 criticized the government in many areas such as high youth unemployment, falling per capita incomes and increasing poverty rates in rural areas - despite increased government spending (Murdoch, 2011). Instead of working together with the United Nations, the government questioned the credibility of the data.  

After nearly ten years of independence, poverty is still pervasive throughout the country. Despite millions of dollars spent, many still have no access to electricity and basic health services. Travel for rural populations remains a challenge. Will East Timor be able to realize its vision 2020? It is feasible provided the government starts investing in its human capital.

Recently, the government has expressed interest in joining regional economic co-operations - such as the South East Asian Nations (ASEAN) and South Pacific Forum. By joining these regional co-operations, the hope is that the country can participate in a regional market - thus enabling East Timor to benefit from economies of scale and comparative advantage.

But, without prudent investment in human capital and infrastructure, East Timor will be unable to compete economically and politically with other regional member states.