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Professor James Fox
Independence celebrations have ended and now the new government of the Democratic Republic of East Timor must confront the realities of developing a country with few resources but great expectations. On 27 September 2002 when East Timor joined the United Nations as the 191st member of the world community, it did so as a nation with one of the lowest per capita incomes in the world. Its national budget for 2002-2003 is less than US$70 million. Yet to avoid a significant deficit, much of this budget, as well as successive budgets, will depend on substantial donor contributions.
East Timorese eagerly await future revenues from the sale of oil and gas, but these revenues are unlikely to boost national income significantly until after 2006. They will not provide a major income source until 2010. And then, the flow of funding will probably last for only ten years.
Under the tight budget plans set out for the next several years, the civil service, including all of East Timorís school teachers, is to be kept to a minimum of 12,000 positions. Government wages are capped; and only US$3 million has been allocated for development in 2003. Per capita spending is projected to decrease from $US273 in the fiscal year 2002 to $US173 in 2006.
Already conditions have become difficult. The rapid reduction of UN staff has added appreciably to unemployment. In Dili alone, more than half of the potential working population is unemployed or underemployed. Wages, denominated in US dollars, are declining. The international price for coffee, East Timorís only export crop, is at an all time low.
Fretilin, as the controlling party in the government, has not enlisted all available talent in the country, but has increasingly insisted on party allegiance for its appointments. Legislation that might set a framework for the future has been slow in coming. As yet, no land law, no property law and no law on investment have been finalised. District administration is at an embryo stage and communication with Dili is limited. To make matters worse, East Timor is experiencing the first signs of an impending El NiŮo that could seriously affect agricultural production in the coming year.
Most worrying of all is the current deadlock in negotiations with Australia over ratification of the Timor Sea Treaty. The window of opportunity for commercial exploitation of the all-important Bayu-Udan oil and gas field will remain open until the end of this year. Any delay beyond this time would have far-reaching consequences for East Timorís future.
WATCHPOINT: Will the current deadlock over the joint Australian/East Timor ratification of the Timor Sea Treaty be resolved by the end of this year to the satisfaction of both parties?
About our company:
AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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