On
21-23 May, the Government of Timor-Leste brought leaders from g7+
countries, Timor_leste officials and others together for a 'Global
Conference on the 2030 Agenda: A roadmap for SDGs in Fragile and
Conflict-affected States (conference website). In an effort to make the discussions
more substantive and productive, La'o Hamutuk distributed observations to
participants in the conference. The following is a slightly abridged
version, with links added. You can download the original as a PDF file. Click on any graphic
in this blog to see it larger.
La’o Hamutuk is a
Timor-Leste non-governmental organization which has analysed and advocated for
equitable, sustainable development for 17 years. We are gratified that the
Timor-Leste Government is embracing the Sustainable Development Goals (SDGs),
the global framework for achieving sustainable, equitable and peaceful social
and economic development. Timor-Leste’s
National
Strategic Development Plan (SDP) contains many admirable targets in
health, education and other areas, and we believe that harmonizing those parts
of the SDP with the SDGs is a useful step towards achieving these objectives.
Timor-Leste faces many challenges, from enduring effects of occupation and war,
young institutions, limited fiscal and human resources, poor infrastructure and
widespread poverty and malnutrition, and meaningful progress toward the
Sustainable Development Goals requires political will, wise and strategic
policies, careful planning and concrete action on the part of policy makers,
public servants, development partners and all Timorese citizens.
Decision-making must also include civil society, youth and marginalized groups,
in order to pursue an equitable development process, and their concerns and
needs should be incorporated into all development programs.
The Government’s programs and those of its international partners should be
realistically achievable and based on evidence, understanding Timor-Leste’s
current context and aimed at improving people’s well-being and incomes in the
short term, and equitable economic development and environmental sustainability
in the medium- and long-term. Therefore, La’o Hamutuk offers this analysis of
Timor-Leste’s economic reality and current government policies, along with some
suggestions that we believe can help use the remaining money from our limited
petroleum resources to improve all our people’s lives, and achieve lasting
peace, stability and prosperity.
Achieving
sustainability requires updating our priorities
La’o
Hamutuk congratulates the Timor-Leste Government on successfully pushing for
the inclusion of SDG number 16, ‘Peace and Justice and Strong Institutions,’
which aims to “promote peaceful and inclusive societies for sustainable
development, provide access to justice for all and build effective, accountable
and inclusive institutions at all levels.” Peace is an essential element of
sustainable, equitable development, and the people of this country made
tremendous sacrifices to achieve it.
We
also note that Timor-Leste and the g7+ have committed to meet 19 targets from
several SDGs, including reducing extreme poverty and infant mortality, reducing
violence, improving food security and increasing access to education, water and
electricity.
La’o Hamutuk agrees that Timor-Leste needs to make its state institutions even
more effective, and we appreciate that the other selected indicators address
many of the profound challenges our people currently face. However, there are
other important areas which have more immediate impacts on people’s lives, such
as endemic malnutrition and disease, dysfunctional healthcare and education
systems, and poor quality infrastructure, particularly in rural areas, but are
not expressly addressed by any of the selected indicators.
The SDP contains targets for many of these areas, and we understand that the
Government plans to implement the SDGs according to the objectives outlined in
the SDP; however, the SDP is an aspirational document, not a realistic plan,
and does not include cost estimates or timelines. Furthermore, some aspects of
the SDP – such as the
Tasi
Mane petroleum infrastructure project,
airports and
ports – do little to address the urgent needs of the
majority of our people, and the country has limited resources with which to
carry out these large projects.
The Prime Minister’s office carried out a review of the SDP in 2016, but the
results have not yet been released. When La’o Hamutuk was consulted during this
process, we were told that the main objective of the review was to evaluate SDP
implementation to date, rather than revising and adjusting it according to new
information and circumstances. The plan was developed in 2009-2011, when many
people incorrectly believed that Timor-Leste’s oil revenues would last for
decades.
Six years later, Timor-Leste
has received nearly all of the revenues we will get
from developed oil and gas fields. This requires a major rethink of our
national programs and priorities, to reduce near-term spending to sustainable
levels and evaluate the costs and likely benefits of the most expensive
projects. Continuing down the current unsustainable course could lead Timor-Leste
into severe financial difficulties within a decade, without a diversified
economy or strong human resources to overcome them.
Therefore, we call on Timor-Leste and its friends to seriously reassess the
development strategy, analysing all major projects, with the goal of building a
diversified non-oil economy to move us toward long-term sustainability. The
SDGs can be a reference, but the most important guide should be the needs of
the majority of our people.
Petroleum
revenues will effectively end next year
In
order to design sustainable, realistic plans for the future, Timor-Leste’s
policy makers first need to recognize the imminent end of petroleum revenues.
The projections in the
2017
State Budget show revenues falling to $80 million in 2018, or less
than one-twentieth of what they were in 2014; by 2021, they will be zero. As of
today, Timor-Leste has already received 98% of the total expected revenues from
Elang-Kakatua, Bayu-Undan and
Kitan.
Thus,
Timor-Leste now depends on returns on investing its
Petroleum
Fund (PF) to finance state activities. However, even though yearly
withdrawals are supposed to be limited to the ‘estimated sustainable income’
(ESI) the Government withdraws more than that almost every year. In
addition, the PF’s investment returns have been lower than the 5.7%
projected by the Ministry of Finance, earning less than half of what was
predicted during 2015 and 2016. As this graph shows, the state’s overall
financial flow has been negative since 2015 and large deficits are projected
from 2018 on.
The
combination of excess withdrawals, dwindling oil revenues and lower
investment earnings has caused the balance of the PF to fall from its $17
billion peak two years ago, and the 2017 State Budget expects that the Fund’s
total value will fall to around $12 billion by 2021. (La’o Hamutuk calculates
that it will drop even further if all the government’s current proposals are
implemented.) At the same time, most of the
growth in ‘non-oil’ GDP is driven by state spending
(of oil money). Without a large and rapid increase in non-oil revenues, the
State will run out of money as soon as a decade from now.
Although it is possible that Timor-Leste will achieve additional revenues
from
Greater Sunrise or
other gas
and oil fields, or from
mining,
the likelihood is remote, and this will not be significant for many years, if
ever. It would be foolhardy to gamble the country’s future on imaginary
quantities of hypothetical non-renewable resources that may appear someday.
Even if they do materialize, they will not provide as much revenue as
Bayu-Undan already has, and will only prolong non-sustainable resource
dependency for a little longer.
Megaprojects
and extractive industries undermine sustainable development
The
Government is withdrawing non-sustainable amounts from the PF partly because
recurrent expenditures on wages, goods and services, fuel, and social security
programs, are steadily increasing; in fact, recurrent spending alone has been
much more than ESI since 2014.
The
bigger drain on the Petroleum Fund is the ‘front-loading’ policy which involves
high spending on physical infrastructure, ostensibly to build foundations for
future development. However, the bulk of the infrastructure spending so far has
been for national roads, bridges,
electricity, airports and ports, while other areas like
water, sanitation, schools and hospitals have been under-served. Increased
access to electricity and improved roads has benefited people; however, water,
sanitation, health and education are more fundamental to people’s lives, and
should receive more resources and attention.
In addition, the Tasi Mane petroleum infrastructure project absorbed more than
$200 million between 2011 and 2016. The 2017 budget allocates $65 million more
for it, about as much as Timor-Leste has allocated for health this year.
Between 2017 and 2021, the Government plans to spend more than $1.1 billion on
just the three largest projects, or almost a third of total capital
expenditure, and billions more after 2021 to complete the projects. However,
the Budget only includes a few smaller components of Tasi Mane – Suai airport,
the
Suai Supply Base and part of the south coast
‘highway’. The other two (much larger) projects – the
petrochemical refinery at Betano (which requires two
oil pipelines) and the Sunrise gas pipeline and LNG processing plant in Beaçu –
are left out. La’o Hamutuk’s rough estimate of total cost is $15 billion – the
entire Petroleum Fund – if private investors continue to avoid the project.
Space does not permit a detailed analysis of the Tasi Mane project, but La’o
Hamutuk agrees with most independent analysts that it is not economically or
socially justifiable. Uncertainties about markets, raw materials,
procurement processes, economic analysis, environmental
risk,
maritime boundaries, investor and consumer confidence and
managerial experience put the entire project into question – especially as it
is diverting financial and policy resources from more realistic, achievable and
sustainable development. It is time to stop pouring good money after bad.
During the last three years, the
Oecusse
special economic zone (ZEESM) has received almost $500 million in public
funds, with no significant private investment, no public cost/benefit/risk
analysis, and little transparency or accountability. Future expenditure
projections for ZEESM have not been released, but it could receive billions
more in public funds, especially if other investors continue to stay away.
We are therefore deeply concerned that these projects will waste a large
proportion of Timor-Leste’s people’s money, while taking up valuable
agricultural land, evicting people from their homes and farms, and causing
increased poverty, social conflict and environmental destruction. Although
dubious new airports in Oecusse and Suai are already under construction, the
planned expansion of Dili airport – which is expected to cost up to $400
million – is also difficult to justify, given the limited numbers of flights,
airlines and passengers. Last year, the government created a public-private
partnership for a
large container port west of Dili which is also
questionable, given the country’s overwhelming import dependency and plausible
traffic projections.
Around
$400 million in
loans has
already been contracted, mostly for roads, and the Government hopes to borrow
almost $1.3 billion more over the next five years, around $900 million of which
is for Dili airport, Suai Supply Base and the south coast highway. None of
Timor-Leste’s current creditors (Japan, World Bank, and ADB) will finance these
projects as they believe they are not viable, and we worry that less scrupulous
lenders could exploit our precarious position to purloin our petroleum savings
or infringe on hard-won national sovereignty.
When the oil money is gone, Timor-Leste will probably be
unable to repay those loans without cutting essential services. Therefore,
taking on so much debt is a threat to the next generation. We should
learn from the experience of other countries who took on unsustainable debt,
only to become trapped in a debt-cycle which continues to this day.
While Government policies have neglected agriculture, tourism and other
sustainable industries, they are giving more attention to new extractive
activities. National Parliament is debating a new Law to invite mining in
Timor-Leste, which threatens our environment, our people’s health, and will
usurp arable land. In addition, the Government recently awarded a contract to
conduct onshore exploration for petroleum over an area of around 200,000
hectares in southwest Timor-Leste.
Most of Timor-Leste’s people live as subsistence farmers who depend on the
earth for their livelihoods, but there is limited land which is suitable for
agriculture. The largest area of arable land is on the south coast, but
petroleum and mining industries could make it unavailable or unusable. Also,
many livelihoods depend on the sea, and fishing and tourism could potentially
become important sources of revenue. Unfortunately, these sectors have not been
prioritized by the Government, and are instead being endangered by the
promotion of extractive industries.
Prioritize
healthcare, education, basic infrastructure and sustainable economy
Access
to certain services has improved in some areas, such as electricity, water and
sanitation, and malaria appears to be under control. However, malnutrition and
stunting, especially for young children, are among the highest in the world and
could permanently damage their lives and future economic development.
Small-scale rural infrastructure continues to be underfunded and mismanaged,
and more work is needed to combat waste and corruption in public services and
infrastructure projects. However, the biggest barrier to progress is the
continued prioritization of megaprojects and development of offshore and
onshore extractive activities, which diverts the state’s time, energy and money
away from these basic services and infrastructure.
Therefore, in addition to evaluating all projects and cancelling those without
clear benefits, Government efforts need to be refocused towards the key areas
with the most immediate impact on people’s lives, including healthcare, education,
basic infrastructure and agriculture and other sustainable economic activities.
This requires not only increased budget allocations, but improved planning and
management in the state institutions in charge of these sectors.
The SDGs contain many useful targets that can strengthen Timor-Leste’s national
development plan. We suggest a few targets which are possible to achieve and
which would improve all Timor-Leste’s people’s lives.
SDG
#1 – ‘No Poverty’ – contains targets for social protection systems, equal
rights to economic resources, and pro-poor and gender sensitive national policy
frameworks.
SDG
#2 – ‘Zero Hunger’ – contains targets for reducing malnutrition, and increasing
food productivity, farmer incomes and investment in technology and training for
agricultural development.
SDG
#3 – ‘Good Health and Well-being’ – includes targets such as achieving
universal access to quality healthcare services, medicines and vaccines,
reducing maternal deaths, universal access to reproductive healthcare services,
combating tuberculosis, hepatitis and water-borne diseases, and increasing
health financing and the recruitment and development of the health workforce.
SDG
#4 – ‘Quality Education’ – includes targets for early childhood development,
building and upgrading education facilities and increasing the number of
qualified teachers.
SDG
#5 – ‘Gender Equality’ – calls for recognition of unpaid domestic work through
the provision of public services and social protection policies, ensuring
universal access to sexual and reproductive rights, and ending violence and
discrimination against women and girls.
SDG#6
– ‘Clean Water and Sanitation’ – contains targets for achieving adequate
sanitation and hygiene for all, reducing pollution and dumping into water sources,
and protecting water-related ecosystems.
SDG
#9 – ‘Industry, Innovation and Infrastructure’ – aims to develop quality,
sustainable infrastructure for economic development and human well-being,
increase small-scale industries’ access to credit, enhance scientific research
and technological capacity in developing countries.
Conclusion
In
order to achieve a truly sustainable, equitable society and economy in line
with the Sustainable Development Goals, the Government of Timor-Leste should
objectively assess which aspects of its plans will advance sustainable
development. If certain projects are found to be unreasonably expensive,
lacking in clear returns or not compatible with the principles of
sustainability or equity, they should be cancelled.
The Government’s road map for the implementation of the SDGs echoes the SDP’s
aspirations about improving Timor-Leste’s human resources, infrastructure and
institutions, and eliminating poverty and diversifying the economy by
2030. While these are laudable goals, they will be extremely difficult to
achieve while policy makers’ energy is focused on promoting megaprojects and
searching for investors in extractive industries. Without the distractions of
Tasi Mane, ZEESM and other boondoggles, the Government will have more resources
to allocate to the areas that are essential for improving ordinary people’s
lives. Cancelling these megaprojects will make state spending more sustainable,
and supporting agriculture and small industries while reducing extractive
activities will also protect people’s livelihoods and the environment.
While it is probably impossible for Timor-Leste to meet every SDG target, we
can reduce poverty, improve basic services, build and fix infrastructure and
grow our economy by increasing focus on key areas, and improving the planning
and implementation of state programs. Timor-Leste has limited resources, and we
face many obstacles to achieving our objectives. However, if we base our
policies on evidence, make plans that are realistic, and put the basic needs of
our people first, we will be able to make Timor-Leste the equitable, peaceful
and sustainable country that Timor-Leste’s people deserve. Hamutuk, ita bele!.
These
observations were written before the conference. At the conference,
a
road map poster and
brochure were distributed, and a
post-conference
press release summarized the event. La'o Hamutuk was disappointed at
how little discussion there was about actions which could benefit more people
than those who are working in the institutions of governments and donors.
