It was never meant to be seen outside of a UN retreat... but now a very critical assessment of East Timor's national institutions has surfaced, causing anger in the government.

Perhaps most controversially, the UN report said that by the end of 2012, a consolidation of power in the hands of the Prime Minister may undermine the role of the Parliament and rule of law.

Prime Minister Xanana Gusmao has rejected the report and the UN Mission in East Timor has been quick to distance itself from the leaked document, saying it was just one assessment of Timor Leste's situation. But the spat comes at a sensitive time.

Reporter: Liam Cochrane

Speakers: Xanana Gusmao, prime minister, East Timor; Dionisio Babo Soares, General Secretary, National Congress for the Reconstruction of East Timor (CNRT); Martinho Gusmao, Catholic priest and election commissioner; Gyorgy Kakuk, spokesman for the UN Integrated Mission In East Timor (UNMIT); Mari Alkatiri, former Prime Minister and Secretary General of the FRETLIN party

Cochrane: At a seminar in central Dili, university students, government officials, diplomats and foreign aid workers gathered to hear East Timor's leaders discuss the country's progress since independence and the challenges ahead. And it was those challenges as described in a leaked UN report that soon became a hot issue for Prime Minister, Xanana Gusmao. The document was a slide show presentation on sustainable democratic governance dated 24th January and meant for participants at a UN retreat. But somehow it leaked and was published in the influential weekly newspaper, Tempo Semanal. Among the litany of state failings it outlined was the comment that more and more power is being consolidated with the prime minister, saying this may undermine the role of the parliament and the courts.

After the seminar, the prime minister wasn't keen to talk to foreign media, preferring to focus on the UN leaks.

Cochrane: Is it possible to get a few minutes to speak to you about apparently you had some strong criticisms of the UN?

Prime Minister Gusmao: I already talk. They also have a strong criticism.

Cochrane: Would you like to tell us about them?

Prime Minister Gusmao: No, no.

Cochrane: OK, thank you for your time.

Prime Minister Gusmao: They had leaks, you can go there.

Cochrane: They had leaks?

Prime Minister Gusmao: Yeah.

Cochrane: Whose leaking what?

Prime Minister Gusmao: UN, UN, UN, just go to UN.

Cochrane: However, General Secretary of CNRT, the National Congress for The Reconstruction of East Timor, Dionisio Babo Soares spoke on behalf of Xanana Gusmao's party.

Soares: Well, I think it's not only the prime minister, but I think the Timorese as a whole and myself representing the party, we consider it a personal attack on the prime minister. I mean how could the UN who's been here working with the prime minister for this long and we have built a very strong relations and even I would say emotional attachments, long hours and suddenly have to come up with a report like that and it's almost insulting the prime minister as if he's the main objection to democratic process in this country. So this is I think it is a blatant or almost disrespectful attack on the prime minister and this should be corrected. I think the UN should review entirely the structure of its organisation in the country and we need someone who could cooperate with the Timorese government to help this country to step out from this phase of the development to another phase.

Cochrane: What do you mean specifically by restructuring the UN in this country, what do you mean?

Soares: I think I'm very disappointed. If this report is true, I don't think this government or the Timorese people is in a position to work with the current structure of the UN in this country. I mean it needs to be reviewed completely.

Cochrane: From reading the report, you get the impression that once the UN leaves the country is going to fall apart in many ways. Can I get your response on that?

Soares: Eh, I think it is an over exaggerated statement. If I don't want to say it's bullshit.

Cochrane: Catholic priest and Election Commissioner, Martinho Gusmao, was not surprisingly a little more diplomatic in his response to the leaked UN assessment.

Martinho Gusmao: Well, this is what in this moment I think has corrupted buildings. International committee works in Timor Leste for about 12 years, since '99 up to this time. My question is that for this long time, what happened to us that we remain the fragile state and I think you are responsible for that.

Cochrane: So you think that's more, the report reflects a failing of the UN?

Martinho Gusmao: They never recognise that, this is amazing that they say that this is fragile state and they don't aware that they are part of this fragility and they cause this fragility.

Cochrane: Spokesman for the UN mission in East Timor, Georgy Kakuk, said the leaked document was one perspective discussed by senior UN leaders, but is not UNMIT's official assessment of East Timor's situation.

Kakuk: UNMIT's staff and consultants produce many internal briefing papers and analysies that do not always represent the views of the UN or the mission's leadership. These papers help us share and consider different perspectives. The presentation referred to by Tempo Semanal is one such document and it does not reflect the views of the mission and its leaders and we have strong and effective channels for communicating our views and concerns directly to the government of Timor Leste and we do so regularly.

Cochrane: Back at the seminar, the UN report was actually bringing two old political foes closer together, former prime minister Mari Alkatiri from the Fretilin Party was finding common ground with Xanana Gusmao, saying in his time he was criticised for not moving the country forward and now it's Mr Gusmao's turn to face the heat.

But Mari Alkatiri also said East Timorese politics is maturing, saying he used to consider Xanaha Gusmao a political enemy, but now sees him as a political adversary.

It may sound like semantics, but the presence of the former prime minister, the current prime minister and the President, Joseph Ramos Horta all on stage together, urging cooperation and peaceful politics is seen as a positive sign for the elections next year.

Timor rejected Chinese spy offer

Melbourne Age - May 10, 2011

Philip Dorling – China recently tried to establish a spy base in East Timor, according to leaked US diplomatic cables.

The Chinese proposal to build and operate a surveillance radar facility on East Timor's north coast was made in December 2007, but was viewed with suspicion by senior East Timorese officials who consulted with the US and Australia before rejecting the project.

The Chinese initiative, described as "a strategic threat", is revealed for the first time in US embassy cables leaked to WikiLeaks and provided exclusively to The Age.

While Chinese diplomats insisted to their American counterparts that East Timor was "strategically unimportant" to Beijing, the US embassy in Dili reported to Washington in February 2008 that Deputy Prime Minister Jose Guterres had called in then US ambassador Hans Klemm to advise that Chinese defence firms had approached East Timor's government with an offer to establish a radar array to monitor shipping in the strategic Wetar Strait.

Although anxious to secure assistance to crack down on illegal fishing in East Timorese waters, Mr Guterres was suspicious of the Chinese offer to build and operate the radar facility free of charge.

"The only catch was the facilities were manned by Chinese technicians," Mr Guterres told the US embassy. He was concerned "the radars could be used for purposes other than those touted by the Chinese. They could instead be used to extend China's radar-based intelligence perimeter deep into South East Asia."

The Wetar Strait separates East Timor's north-eastern coast from Indonesia's Pulua Wetar Island and is reportedly used by US Navy vessels including nuclear submarines moving between the Pacific and Indian oceans.

An Australian defence intelligence source told The Age that Australian officials were aware of the Chinese proposal, which was "just another part of China's growing intelligence activity through Asia and beyond".

Other leaked US embassy cables contain references to expanding Chinese intelligence activities in south-east Asia including Philippines intelligence concerns that Chinese proposals to establish new consulates in the Philippines were intended to provide cover "to conduct SIGINT [signals intelligence] and other collection activities targeting US and Taiwanese military activities".

US diplomats in Dili reported that President Jose Ramos-Horta, Mr Guterres and Secretary of State for Defence Julio Pinto had "repeatedly and explicitly" affirmed that "Timor-Leste's strong preference is to co-operate with its democratic partners – Australia, Portugal, the US and Japan – on defence and security matters".

Chinese defence assistance to East Timor has been confined to construction projects, modest offers of training assistance and the supply of two, 40- year-old Shanghai-class patrol boats, a procurement decision that attracted some media attention in Australia last year.

Professor Hugh White, a former deputy secretary in the Defence Department, suggested that China's supply of the vessels to East Timor was an intrusion into Australia's sphere of strategic interest.

Prime Minister Xanana Gusmao told US diplomats in October 2008 that the acquisition of the patrol boats, to be manned by East Timorese, had been initiated during the government of former prime minister Mari Alkatiri, and that "Gusmao only went forward with it after he had been presented with clear evidence regarding the activities of fishing boats operating illegally in Timorese waters".

Canberra has said that the purchase of the two patrol boats is a bilateral issue for East Timor and China and that their contribution to fisheries surveillance is welcome.

East Timor rejects WikiLeaks claims

ABC Radio Australia - May 10, 2011

Fairfax newspapers are reporting news of East Timor rejecting an offer from China to build a surveillance radar facility on its territory fearing it would be used for spying.

The information has come from US embassy cables given to Fairfax media by Wikileaks. The Chinese offer came at the end of 2007 but was rejected by East Timorese officials after they consulted with the US and Australia. According to the cables, which have not been seen by the ABC, East Timor's Deputy Prime Minister Jose Luis Guterres was the official who told the US embassy about the Chinese radar offer.

Presenter: Liam Cochrane

Speaker: Jose Luis Guterres, East Timor's Deputy Prime Minister

Cochrane: First of all can you tell us what was this offer from China in regards to the radar station?

Guterres: From what I know there was never any offer from the government of China to build radar systems in Timor. But what I know is that some companies from China were willing to supply, at commercial basis, a radar system. So that's what I know, and this issue has never come to the Council of Ministers to decide to accept or not.

Cochrane: Mr Guterres the article in The Age newspaper and Sydney Morning Herald this morning actually mentions you specifically, saying that you were the one who went to the US Embassy to discuss the issue and to discuss your concerns that the radar could be used for spying essentially. Is that the case?

Guterres: No first if this comes from WikiLeaks I only can say that first I cannot comment on the content of any cables that are coming from diplomatic mission of any embassy in any country. The second one is that our policy in terms of defence cooperation with any country is open, it's not secret. And I want to mention to you that when I was at Boao forum in China just last year, I had stated clearly to everybody, foreign dignitaries there including Chinese, that if Timor was willing to cooperate with China and any country at a military or economic level, we don't hide any cooperation of any country, including the United States of America, with Australia, Indonesia or other country.

Cochrane: Can you give us a little bit more detail on the offer that was made though, the Chinese offer for radars? You say that it was private companies involves, can you tell us a bit more about it?

Guterres: Well at the time we were thinking of having the naval capabilities, and the naval capabilities the Chinese companies were willing to supply and then later we did buy the two patrol boats from China. But in terms of radar assistance, there was never an issue at the government level to decide if we would buy for them or not. But in terms of analysis of the needs of our naval force, you have to have the capabilities for radar, all the country in order to detect any illegal fishing or any illegal entry to our international waters. This also comes in line with the cooperation that we have to have with our neighbours, Australia and Indonesia, because if East Timor waters are secure, the waters in Indonesia... we would contribute to a more secure line in the Indonesian waters and the Australian waters.

Cochrane: Well let's perhaps move to a different topic now. Yesterday you were cleared in a district court of corruption charges that have hung over your head for some time. The accusation was that while you were East Timor's ambassador to the United Nations in 2006, the accusation was you improperly gave your wife a diplomatic job. Your reaction to the verdict?

Guterres: First that was not the accusation, the accusation was that illegally I nominated my wife to the diplomatic job while I was foreign minister, but in fact the court ruled that it was not me, and all the accusations that were initially started by the opposition party in the parliament and then went to and then later to general prosecutor's office, and yesterday the district court cleared for any wrongdoing and I am happy with that decision. And as I always mentioned I did not do any wrong, participate in any illegal decision while I was foreign minister of East Timor.

Cochrane: This was a decision in a district court, I mean it could go further. Do you think this will be the end of this issue?

Guterres: The question here is that there is no illegality, there is no law I committed any crime in, so it can go anywhere but if there is no crime when there is no law that says there is a crime. So I'm prepared for anything.

Cochrane: Ok while I've got you on the line I'd really like to get your thoughts on yet another topic; after floating the idea of setting up an aslyum seeker processing centre in East Timor, Australia is now looking at a facility in Papua New Guinea as well as a people-swap deal with Malaysia that you've no doubt heard about this week. Now is this a relief for East Timor that the pressure to setup a facility has gone to another country?

Guterres: I think the relief will be if we as a community in this region, together with Australia and neighbouring countries, we can solve this problem of illegal trafficking of people to Australia. So the question always was that East Timor was not prepared to host these facilities, but we have said also that we were prepared also to give our contribution, including financial contribution for this to happen if any other countries accepted it. So our basic position is yes, we want to combat trafficking, and we want to help Australia also and all our neighbouring countries, and we are prepared to give our contribution as it is possible for us.

Australia incited Timor unrest: Wikileaks

New Matilda - May 5, 2011

John Martinkus – A leaked US diplomatic cable from the US Embassy in Lisbon in 2006 details a senior Portuguese intelligence official accusing Australia of fomenting the violence in East Timor that year.

The cable, published two weeks ago on the Portuguese news weekly Expresso's website, states that Australia was encouraging unrest, and that it was motivated by oil. Jorge Carvalho, the chief of staff of the Portuguese intelligence agency, is quoted telling the embassy that "Australia had previously fomented unrest for its benefit". The cable continues:

"He cited two instances – demarcation negotiations of the maritime border between East Timor and Australia and demarcation negotiations of oil exploration boundaries off the shore of East Timor – where Australia had fomented unrest to put the pressure on the government of East Timor".

The cable, dated 12 June 2006, was deemed by the US Embassy in Lisbon to be credible enough to circulate to US embassies in Canberra, Dili, the UN, NATO and Washington – as well as to New Zealand and Kuala Lumpur who were also contributing troops to East Timor. The cable's author, US Ambassador to Portugal Al Hoffman, defends the credibility of his Portuguese intelligence source calling him "an important pro-American Embassy contact who is not only knowledgeable in intelligence matters but well connected to political parties across the spectrum".

Hoffman goes on to add that Carvalho's analysis of East Timor was dispassionate: "even his criticism of Australia was delivered in a matter of fact manner".

At the same time as the cable was being written, I was in Dili investigating the cause of the 2006 unrest – which led to the displacement of 130,000 people and the deployment of 2500 international troops to quell the violence. I received information from senior figures in the Timorese armed forces, the F-FDTL, that on three occasions in the previous 18 months two foreigners had approached the F-FDTL leadership requesting their assistance in carrying out an armed coup against the Alkatiri government.

Then prime minister, Mari Alkatiri, told New Matilda at the time that he had been informed of the developments but had not acted on them, as he was confident the F-FDTL leadership would respect the constitution.

Then of course emerged the case of the "petitioners" within the armed forces – a group of 600 soldiers who had been sacked in March after complaining of regional discrimination – and the defection of major Alfredo Reinado and 30 of his men, with weapons.

It was Reinado who began the actual attacks on the F-FDTL on 23 May. The following day, co-ordinated attacks were carried out on the house of the head of the F-FDTL, Major General Taur Matan Ruak, and the F-DTL base on the western outskirts of Dili. The attack on the base was led by a man called Rai Los, who would later emerge as the chief informant in an ABC Four Corners program alleging that Alkatiri had provided him with weapons to form a death squad. Those allegations were instrumental in forcing Alkatiri from power. (The Four Corners team won a Gold Walkley that year for their efforts.)

Reinado was also allowed by the Australian forces to remain free and continue to call for Alkatiri's resignation – and was provided with SAS bodyguards in his historic hotel accommodation in the hill town of Maubisse.

It seems that whoever had been making approaches to the F-FDTL had finally found some lower level soldiers to carry out their planned coup.

As I detailed in a story for SBS Dateline, "Downfall of a Prime Minister", which went to air on 30 September that year, there were many people in Timor suggesting that Alkatiri-rival (and then president), Xanana Gusmao, had received the support of the Australians and that the armed groups of Reinado and Rai Los, and elements of the police, had initiated the attacks on the F-FDTL. The rumours and accusations of Australian support for the rebel soldiers and the opposition parties were fuelled by the involvement of the Australian military in evacuating the families of pro-Gusmao figures.

Coincidentally, on the day our program went to air, Reinado and 56 of his men walked out of the prison in Dili where he had been incarcerated after Portuguese police had found a large cache of weapons in his house across the road from the Australian base in Dili. The Australian military blamed the New Zealand troops based in the area and nothing more was ever said about it.

Reinado of course was shot dead at the house Jose Ramos Horta on 11 February 2008, after he had recorded a DVD message accusing Gusmao of being behind the 2006 violence.

Rai Los is now a rich man and has recently received a government contract from the Gusmao Government to oversee the laying of power lines in the Liquisa mountain district where he is from. The other rebel leaders have all been pardoned for their role in the 2008 attack on Jose Ramos Horta with former rebel leader Gastao Salsinha telling Timorese news weekly Tempo Semanal, "They played with us as if they played cards, to promote their own interests".

In the Wikileaks cable, Carvalho explains bluntly why Australia was interfering in East Timor's politics, "Australia's motives were driven by geopolitical and commercial (e.g. oil) Interests".

At the time, the Fretilin government believed it was Australian support for Gusmao and his anti-Fretilin coalition that had emboldened the opposition to continue demonstrations, armed attacks on the army and gang violence to call for Alkatiri to resign. According to Alkatiri at the time, there was only one world leader calling on him to resign: former Australian prime minister John Howard.

After he finally did step down as prime minister, Mari Alkatiri hinted of Australian involvement in his resignation, particularly focussing on the role of the Australian media, "for me when all the media take the same line accusing me by spreading allegations of all kinds. It seems that there is some mastermind. To quote to give instructions and orientation to the media to do it for the single same purpose to get to have me to get me to step down".

Speaking of his resignation and the campaign to get rid of him he told me in an interview at the time "this has been very well planned and executed very intelligently, professionally".

With more than 300 Cables from the US Embassy in Dili among those to be released by Wikileaks, we will finally get a much clearer picture of what role Australia played in the regime change in East Timor in 2006.

UNMIT/ISF

East Timor tells UN to get out

ABC News - May 20, 2011

Sara Everingham and staff – The East Timorese prime minister has lashed out at the United Nations mission in East Timor, saying it should leave the country.

In a fiery response to a UN-leaked document accusing him of being an obstacle to democracy, Xanana Gusmao proposed the UN mission in East Timor be wound up and its staff be sent to the Middle East to support democracy there.

The United Nations has distanced itself from the document and says its relationship with East Timor's government is strong, but it is not the first time the government and the UN have been at odds in recent months.

The document, published by an East Timorese newspaper, was written by an employee of the UN mission and part of a presentation at a UN meeting in January this year.

During a speech in Dili this week, Mr Gusmao vigorously defended his record of fostering democracy in East Timor.

President Jose Ramos-Horta has leapt to the prime minister's defence, calling the document pseudo-analysis. Dr Ramos-Horta says many UN staff in East Timor do not speak the local language and rarely mix with East Timorese.

The government accused the UN of producing a report based on out-dated data. The chief communications officer with the UN peacekeeping mission, Sandra McGuire, says the leaked UN document does not reflect the views of the mission.

The row comes just months after East Timor's government criticised a crucial UN report on progress in the country.

Mr Gusmao also has fired a broadside at aid-donating countries like Australia, saying the billions of donated dollars have failed to produce any physical development and have instead created even more poverty.

Michael Leach, an associate professor in politics at Swinburne University, says the attack is another sign East Timor is keen to stand on its own two feet.

"The government has taken the view that – and it has expressed it at various times – that while they appreciate the international assistance that has been going on since independence, that perhaps there hasn't been as much to show for that assistance as some might think over time," he said. "They certainly are looking forward to taking full control... They are a sovereign nation."

Today East Timor marks nine years since independence from Indonesia. The United Nations is planning to withdraw from East Timor by the end of next year but before that, it will help oversee elections in the country.

Associate Professor Leach says these latest developments will not help, but believes all parties will be able to work together to ensure smooth elections. "I suspect that these issues will be resolved but certainly it is a high point in the tension that we've seen in the last week," he said.

UN on back foot in row with Timor PM

Agence France Presse - May 20, 2011

Jakarta – The United Nations Mission in East Timor (UNMIT) was on the back foot Friday after Prime Minister Xanana Gusmao angrily accused the world body of trampling on his country's sovereignty.

UNMIT was forced to release a statement denying it saw the former guerrilla fighter as an obstacle to democracy after documents critical of Gusmao that were used in a UN briefing were leaked to the local media.

"This document is not an official UNMIT document. It does not represent the official views of UNMIT," the mission said in a statement.

In a speech marking the ninth anniversary of East Timor's independence from Indonesia earlier this week, Gusmao slammed the UN and the East Timorese "experts" on its staff.

He said that from 2000 to 2008 the "international community" had spent almost $8 billion in the tiny half-island state but "we do not see any physical development and even more poverty was created in our country".

The prime minister mocked the UN's record at development and conflict resolution around the world, and suggested UNMIT should focus its efforts on trouble spots like Afghanistan, Pakistan and the Middle East.

"My proposal is this: UNMIT and Timorese experts, offer your services to improve Iraq, Afghanistan, Pakistan, and give support to democracy in Yemen, Syria and Libya," Gusmao said.

He accused East Timorese nationals who worked with UNMIT of grovelling for money. "I want to say to these Timorese, which have become experts for UNMIT, you do not need to show off; you do not need to grovel for other people's money," the prime minister said.

"This is a sickness, which we call mental colonialism or intellectual colonialism... In our constitution it says: do not alienate our sovereignty, do not sell our sovereignty to other people."

He said all the "big 'experts' in our country" should "work together with President (Barack) Obama to look to resolve the $14.5 trillion dollar American debt, and the big fraud which the financial institutions and banks displayed in 2009 that damaged the whole world".

"America and Europe need these Timorese experts and internationals, to correct the standards which they so dearly defend," he said.

"And the world needs reform that is indeed big. Big organisations in the world need reforms which are bold and clear, in order to clean the dirt from within, so that they can gain experience to clean other people's backyards. The UN itself needs this big reform."

Refugees & asylum seekers

East Timor asylum centre plan put to rest

ABC News - May 13, 2011

The Federal Government has abandoned plans to establish a regional immigration processing centre in East Timor.

The proposal was announced by Prime Minister Julia Gillard last year, but ran into difficulties when East Timor's parliament rejected it.

Immigration Minister Chris Bowen says the Government is now focused on negotiating the proposed asylum seeker deal with Malaysia. But he told ABC's Radio Australia there are alternatives if that deal falls through.

"We're not having any further discussions with East Timor but we will have discussions across our region," he said. "There are 44 members of the Bali Process, we've reached a very good outcome in Bali in terms of countries of the region agreeing to enter into just these sort of arrangements to break the people smugglers' model."

The Government's deal with Malaysia will see the country take up to 800 asylum seekers in return for Australia accepting 4,000 refugees who have had their claims processed in Malaysia. The agreement is yet to be formalised.

Last month, East Timor president Jose Ramos-Horta dealt another blow to Australia's hopes of forming an agreement with his country by saying he did not believe the two countries should hold bilateral talks on the issue.

Dr Ramos-Horta said his country would not engage in bilateral talks with Australia about the issue, because it needed to be done through multilateral forums instead.

The country's prime minister Xanana Gusmao also reportedly shot down the idea in March. The Economist magazine said he "finally put the idea out of its misery" during an interview.

"Chief among Mr Gusmao's reasons for opposing the processing centre is the fact that he would not be able to explain to his poor countrymen why foreign asylum seekers would be entitled to international-grade health care, food, clothing and schooling for their children while so many Timorese do not," The Economist said.

Australia looks for PNG asylum solution as East Timor plan sinks

Sydney Morning Herald - May 6, 2011

Phillip Coorey & Kirsty Needham – The Gillard government is believed to have given up on establishing a regional processing centre in East Timor and is now focusing on Papua New Guinea.

Speculation has been building for some weeks about PNG and it was fuelled yesterday when it was revealed that the secretary of the Department of Foreign Affairs and Trade, Andrew Metcalfe, and the parliamentary secretary for Pacific Island affairs, Richard Marles, were in Port Moresby for high- level talks.

Last month, on his way home from a trip abroad, the Foreign Affairs Minister, Kevin Rudd, stopped in Singapore to visit the PNG Prime Minister, Michael Somare, who was having medical treatment.

With Australia's detention centres at capacity and asylum seekers continuing to arrive, the government is suffering politically and is badly in need of a solution.

The opposition has demanded the government use the detention facility on Nauru, the site of the Howard government's "Pacific solution".

But the Prime Minister, Julia Gillard, insists there must be a regional solution with the host nation a signatory to the United Nations refugee convention. PNG is a signatory and there is a mothballed detention facility on Manus Island, which was also used by the Howard government and is expected to be used again by the present government.

The government was playing down the speculation but it is understood PNG is "a live option", given East Timor's hostility.

A spokesman for the Immigration Department, Sandi Logan, said Mr Metcalfe "regularly travels overseas to meet with his counterparts" and his latest trip was part of his regular meetings with PNG immigration and foreign affairs officials. He cautioned against jumping to conclusions.

A spokesman for the Immigration Minister, Chris Bowen, said: "As the minister has already said, the government is engaging with countries across the region about tackling people smuggling and irregular migration, following the endorsement of the regional co-operation framework in Bali. That work continues."

It is Mr Marles's second visit to PNG in six weeks. He met a PNG minister on March 31, at the same time Mr Bowen attended the "Bali process" meeting.

Last July, the then foreign affairs minister, Stephen Smith, briefed the- then PNG foreign minister, Sam Abal, on Ms Gillard's proposal for a regional processing centre.

Graft & corruption

Court clears East Timorese deputy PM

Australian Associated Press - May 9, 2011

An East Timor court has acquitted the country's deputy prime minister of corruption and abuse of power charges after he was accused of securing an overpaid job for his wife.

Prosecutors had charged Jose Luis Guterres with improperly giving his wife, Ana Maria Valerio, a job as counsel to the East Timor ambassador to the United Nations in New York in 2006.

The accusations were based on a 2009 report by the country's ombudsman Sebastiao Ximenes, who recommended bringing Guterres to trial for acts of collusion and nepotism.

"The court found that Jose Luis Guterres did not commit any wrongdoing or an illegal action by appointing someone. He also did not commit an abuse of power," chief judge Joao Ribeiro told Dili district court.

"The accusations are only based on rumours and prejudice, so all charges have to be dismissed," the judge added.

Ximenes said in the report that the appointee should have been a career diplomat who had worked through various lower-level posts, "prerequisites Ana Maria Valerio did not fulfil".

The alleged abuse of power included the deputy prime minister's wife being overpaid about $11,150 in housing allowances restricted to East Timorese diplomats and citizens working overseas who do not own homes in the destination country.

"I'm delighted with the court's ruling. This is a good example for our people to continue to trust our legal institutions," Guterres told reporters after the ruling.

"I'm grateful that during the trial Prime Minister (Xanana) Gusmao never stopped me performing my job as deputy prime minister. I will continue to serve the people," he said.

East Timor's government has faced repeated accusations of graft, implicating senior officials including Justice Minister Lucia Lobato and Finance Minister Emilia Pires as well as Guterres.

The government denies any wrongdoing but bowed to public concern by appointing the country's first anti-corruption commissioner in February last year.

East Timor won formal independence in 2002, three years after a UN-backed referendum that saw an overwhelming vote to break away from Indonesia, whose 24-year occupation of the country cost an estimated 200,000 lives.

Despite massive natural gas deposits, East Timor's largely rural population is among the world's poorest.

Agriculture & food security

Fairtrade defends coffee certification system

ABC Radio Australia - May 23, 2011

Last week, Connect Asia ran a story about coffee farmers in East Timor, who were shocked to hear the green coffee cheries they sold to middlemen for 30 cents US went on to be sold for 26 dollars or more in places like Australia, often as a fair trade product.

The farmers said they were desperate to see an increase in the price paid for coffee in order to sustain their very simple lives and send their kids to school. Fairtrade Australia and New Zealand got in touch with Radio Australia, saying they were disappointed with the implication that the fair trade system was not providing benefits for farmers in developing countries.

Presenter: Liam Cochrane

Speaker: Stephen Knapp, CEO Fairtrade Australia and New Zealand

Cochrane: First of all, let me give the chance to air your concerns about what we broadcast last week?

Knapp: First of all I think the key point is that Fairtrade Coffee can only be sold as Fairtrade if it's met Fairtrade standards through the entire supply chain and I mean the main part of that is the economic benefits that go to the farmer organisation, which is that they're paid at least a Fairtrade minimum price and then also an additional Fairtrade premium, that goes to the group and the group as a whole decide how they're going to invest that in local community development projects. Now currently the Fairtrade minimum price stands at $1.40 per pound with an additional 20 cents premium for organic certification and a further 30 cents a pound premium which is the community investment premium which goes to the entire group. And I mean we set that minimum standard by doing some research, the minimum price by doing some research with farmers all over the world to try and establish what's the cost of sustainable production and you know exactly as you say what we're looking for is a price that covers the farmers cost of production and also their basic needs, so that they're able to put food on the table, send their kids to school, the sort of things that we take for granted. And then the additional premium then goes to the group as a whole and they decide democratically how they're going to invest that premium in their local communities and time and time again, they decide to invest in better health care facilities, better school facilities for their kids, access to basic needs, in some parts of Africa access to fresh water and things like that are problem, so that's the sort of thing that they would decide to spend the premium money on.

Cochrane: Now in East Timor, there are four major coffee companies and one of the largest is CCT the Cooperative Cafe Timor. Until recently, that was the Fairtrade organisation I understand, but it has withdrawn from that process, not wanting to meet some of the requirements. Can you explain the situation there?

Knapp: Yeah, about this time last year, because I mean we obviously do audits and inspections of producer organisations all over the world and there's an annual audit and a three year cycle of a full inspection audit to retain their certification. About this time last year, CCT had an audit and a decision came through from our certification body FLO-CERT, which is an independent certifier and is also accredited to ISO65, which is the international accreditation for certification systems and they were issued with a number of corrective actions in order to retain their certification. They then have six months in order to either address those corrective actions or come back with a plan on how those issues are going to be resolved in the future. CCT decided not to respond to the certifier and so in December, voluntarily withdrew from the Fairtrade certification system.

Cochrane: So does that mean from now on there will be no Fairtrade coffee coming out of East Timor?

Knapp: Well, I mean while their under suspension for corrective actions, the producer organisation is still able to fulfil existing orders under their Fairtrade contracts.

Cochrane: Even though they haven't complied with the certification?

Knapp: Well, until they're completely decertified yeah and then there's, because what we do is we give the organisations a six month window in which to address their corrective actions. I mean unless their major, if there's problems around using exploitative labour and that sort of thing, then that would be immediate decertification. But if they're minor certification issues, then we give a six month window for producers to be able to address those issues or come up with a plan on how they're going to address those issues. They're not allowed to enter into any new Fairtrade contracts during that period, but they are allowed to fulfil existing contracts.

Cochrane: I'm speaking with Stephen Knapp, from the Fairtrade Australia and New Zealand Organisation.

Stephen Knapp, the farmer that I spoke to that we heard from earlier the 89 year-old man. He explained that he and his family sold their raw coffee cherries to a businessman, a middleman essentially. He then sold on to CCT, the Cooperative Cafe Timor, which is or was until recently the main Fairtrade company. By that chain of sourcing, it would seem to me like he should be getting some benefits from the Fairtrade system and yet he said that he's never had any assistance from an NGO or from an organisation and was seeking help with processes, with equipment. How is it that this farmer could have fallen through the cracks?

Knapp: Well, I mean Fairtrade is designed to address exactly those problems and the farmers themselves would be part of a cooperative or an association, like CCT is and the farmers would sell directly into the cooperative. So if that farmer was selling to a middleman who was then selling to the cooperative, that doesn't quite make sense to me, because that's not the way the certification system works. The farmer has to be a member of the cooperative. We check that all the supply that comes into the Cooperative comes from the Cooperative members and because they're members of a certified group. Now the minimum price and the premium is paid to the group as a whole. The farmers are the owners of the cooperative. There's always processing costs involved going from red cherry through to the dry green bean that is then exported and there's usually transportation costs and that sort of thing. So what we check as a certification system is that there's transparency around how those costs are deducted from the price, that the producer organisation receives under Fairtrade and then how those benefits are then distributed to the farmers themselves.

Cochrane: And yet in this specific case and I must stress this is just one farmer and there are tens-of-thousands in East Timor, so I don't mean this to be a representative sample. But from the few people I spoke to and in particular this one farmer. He's missing out because of this middleman, because of this businessman who's sort of in the middle of that process. Is that the sort of thing, the sort of compliance problems that CCT had in the past that they've been suspended for?

Knapp: I mean that problem of farmers selling to middlemen. I mean in Latin America they call they coyotes and it's that selling of red cherry at farm gate which is exactly the sort of problem that Fairtrade is trying to address, so that we can build strong producer organisations that are able to get a better price for their members. So I mean it's exactly that very low price that goes to the farmers who are selling their red cherry that we're looking to address through the Fairtrade system. I mean it happens all over the world, not just in East Timor, but this does sound like a particularly low price that that farmers receiving for his hard work.

Cochrane: With CCT being suspended from the Fairtrade certification system at the moment. Do you think it would concern people buying the product, buying the coffee product here in Australia for a lot of money, $26 sometimes up to $40 in some places. Do you think that they would have the expectation that the source of their coffee is fully certiified Fairtrade?

Knapp: Yeah, I mean anything that's sold with the Fairtrade label on is fully certified as Fairtrade. I mean we do the checks we have the audit systems in place.

Cochrane: But you said CCT can continue trading even though it is suspended. It can fulfil its orders?

Knapp: No, CCT were decertified in December and they cannot sell anymore coffee as Fairtrade certified. I mean there is still Fairtrade certified and organic certified coffee in Australia that has come from the CCT Cooperative. But those are stocks that already exist in Australia and very often coffee roasters will buy their product up to a year in advance and I mean the dried green bean that the roasted coffee is made from has quite a long shelf life. So I mean we may well see Fairtrade certiified coffee from East Timor still around in Australia up to about a year from now. So CCT itself are no longer allowed to sell Fairtrade certified coffee under the Fairtrade system.

Fair trade not so fair for Timor coffee farmers

ABC Radio Australia - May 18, 2011

Thousands of coffee farmers in East Timor are bracing for a lean harvest, with heavy rains taking their toll.

Coffee from East Timor has become an unlikely hit, being snapped up by American giant Starbucks and carving out a niche on the fair trade market. But one of the country's major local buyers of unprocessed coffee cherries says this year's harvest might be down by almost a third, which is bad news for farmers already paid a pittance.

While there are initiatives to try to improve the situation in the longer term, there's also a lot of poverty and frustration in the hills above Dili.

Reporter: Liam Cochrane, East Timor

Speakers: Manuel Rosario, coffee farmer; Elizio Maia, coffee farmer's grandson; Lomelino Salsinha, representative of Co-operativa Cafe Timor

Cochrane: I've travelled about 50 kilometres from Dili... winding up into the hills until we reach the heart of East Timor's coffee industry, Ermera district... and 89-year-old Manuel Rosario is showing me his family farm in Lauana village.

So we're standing underneath these tall trees that provide shade to the coffee plants. There's a few green, reddish berries here that look like small unripened fruit. Have they picked most of the berries already?

Rosario (through translation): Yeah, some of them already to ripe, but as I said this year is not good year for coffee farmers in East Timor.

Cochrane: Manuel Rosario says too much rain has ruined the crop.

Rosario: It is in the process, but actually this year, this month, we should picking up harvest month for East Timorese coffee farmers, but because of the weather, weather destroyed everything and sometimes you get hungry about it.

Cochrane: What does he mean, when they get hungry about it?

Rosario: Hunger they only eat one day, once a day or twice a day.

Cochrane: The excessive rains are only part of the problem for coffee growers here in Ermera district.

The old trees don't produce much fruit and without the means to process the green coffee cherries into the more expensive dried coffee beans... they usually just sell the green beans to a local businessman for 30 US cents a kilogram. This year, they've been promised 50 cents, but then their yield will be lower.

When I tell Manuel Rosario that the same coffee he sells raw for 30 cents ends up as a boutique fair trade product costing 26 dollars a kilogram in Australia, he's shocked.

Rosario; In Australia as you said $26 dollars per kilogram, but here only 30 cents per kilogram. If the price is still maintained like this, and they will not send our doctors, our sons to attend the schools.

Cochrane: I ask the old man's 13-year-old grandson Elizio, who's quietly climbed into the fork of a tree nearby, if he wants to be a coffee farmer when he grows up.

Elizio Maia (through translation): I don't want to be a coffee farmer, but I want to be a clever guy and very important person for my country.

Cochrane: How is he going to do that?

Elizio Maia: I want to go to school.

Cochrane: But the education of Elizio and other children of coffee farmers may depend on some fundamental changes coming to Ermera. One of East Timor's biggest coffee producers is CCT, the Co-operativa Cafe Timor.

Lomelino Salsinha is a representative of CCT in Ermera and a former defender in East Timor's national soccer team. We talk at his home, of course, over a cup of local coffee.

Cochrane: Lomelino Salsinha agrees the situation is tough – last year yielded over 11,000 tonnes, but this year Lomilino Salsinha predicts CCT will only be able to buy around 8,000 tonnes.

When I ask about the huge price gap between what's paid to farmers and the retail value of the coffee in the west, Mr Salsinha blames market forces.

Salsinha (through translation): Coffee green bean is quite different from the coffee beans, so it's like 5-to1 calculation to be like that. That's why but based on a marketing price, there's a competition between CCT, Timor Global, Elsa Cafe and Timor Corp. They are four companies that operating around East Timor, mostly based in Ermera where there is competition of the prices that offered for coffee farmers.

Cochrane: I try to pin him down on the price gap, but never quite get a straight answer.

Lomelino Salsinha does explain that as well as buying the green coffee cherries from farmers, CCT also recruits up to 500 of them to work at their processing factory.

He also says it can be hard to convince farmers to change their ways, which often involve just harvesting the fruit each season but not pruning the trees to generate new growth. But some coffee farmers have made the tough decision to prune back their coffee trees.

Adriano Soares doesn't know exactly how old he is... somewhere in his 40s... and says his father and grandfather survived from harvesting coffee. His family made the decision in recent years to try to rehabilitate their ageing trees, but must now wait for them to regrow before they can reap the rewards.

Soares (through translation): It depends on how we maintain the coffee plantation. If we maintain this very well, with a good manner, then it will provide harvest within three years. So you will get it within three years, but if not, then it can be postponed, the coffee beans can be into four of five years to get a harvest.

Cochrane: Until then Mr Soares and his family grow maize and cassava in order to survive.

When I ask him what he'd like the government to do to help his situation, he prefaces his reply by saying that becoming a beggar in his own village would be a big shame for him... but if he had to ask the government for something, he'd like the price of coffee to increase to perhaps one dollar per kilogram. That, he says, would be fair trade.

Local & community issues

Gangs in uneasy peace ahead of Timor elections

ABC Radio Australia - May 19, 2011

There's concern that a peace agreement between martial arts groups in East Timor may not hold if political trouble starts during future election campaigns.

The various groups have been used in the past by political parties as proxy fighters – particularly during unrest in 2006 and 2007 – but have also been involved in clashes over land and personal disputes. A public declaration of peace between some of the major groups was overseen by Prime Minister Xanana Gusmao last week, but it remains to be seen if that will translate to restraint on the ground.

Reporter: Liam Cochrane

Speakers: Nelson Belo, director of the security analysis organisation Fundasaun Mahein; Venancio Lopes, senior leader of biggest martial arts group, PSHT

Cochrane: When people talk about martial arts groups in East Timor, it's not really the same thing as the local karate or taekwondo clubs that most of us would be familiar with. These groups do train in martial arts but they've also been involved in politicised fighting and just general thuggery over the years.

There's estimated to be tens of thousands of members of more than a dozen martial arts groups... which is significant in a country with just 3,000 police officers.

It's a complex situation – political alliances amongst the groups are fluid, personal grievances and revenge can be a factor – but the end result is sporadic clashes, houses gutted by fire and sometimes deaths.

Some suburbs of Dili are considered the turf of a particular group and the graffiti on the walls indicate whether you're in an area controlled by, say the PSHT, or by the 77 group or by Korka.

Nelson Belo, director of the security analysis organisation Fundasaun Mahein, explains how these martial arts groups came to be so popular and so controversial.

Belo: It was created by Indonesian military, Indonesian police, so the reasons why they want to create to destroy resistance, that's the first thing. The second thing they want to setup a kind of time bomb for when Timor independence, so after we got independence these martial arts groups become very popular because of the members they were not well educated, they were very violent because of that, they were used by Indonesian military, and apart from that they also, most of them because they're not well educated, most of they are unemployed.

Cochrane: My translator and guide Guido takes me to one of neighbourhoods in Dili that's known to be controlled by the country's biggest martial arts group, PSHT.

Cochrane: So I've come to the suburb of Aimutin, it's a PSHT stronghold, in fact the President of the martial arts group PSHT lives in the house just across the road from us. During the 2006 conflict this was a scene of some pretty serious fighting and it was a dangerous place to be. But for the last few months, this has been a peaceful place I'm told and there have been efforts to control the martial arts group with a compromise deal, which culminated in the swearing of an oath last week in front of the Prime Minister Xanana Gusmao. It's hoped that the martial arts groups will stay out of election campaigning and any trouble that might ensure, and we're going to try and find some members of one of the martial arts groups in the neighbourhood.

Cochrane: Not far away, we come to a training place and we meet Venancio Lopes, a 29 year old who is a senior leader of PSHT. He was involved in the fighting during 2006 and 2007.

Lopes: Actually we fight with other groups from seven suburbs, Korka, and some other groups and other areas, where every day we fight and even to kill until some of our members were killed in the past.

Cochrane: While the violence has decreased since the clashes of 2006-7 – which left at least 37 but perhaps as many 250 people dead – it does continues to flare up. On the 14th of April, a clash between PSHT and Korka left six people injured and several houses torched.

But Venancio Lopes is keen to stress the peacemaking efforts they've made... and thinks this recent declaration of peace by martial arts group leaders, is significant.

lopes: It's a brilliant idea, it's good for martial arts groups in East Timor, and especially for PSHT group that are left here.

cochrane: Security analyst, Nelson Belo, has a different view of the recent peace agreement.

belo: I think it's not important, the reason why it's not important because in East Timor the law is not common. This kind of peace has been so many times conducted, and then so many times in front of politicians, in front of the Timorese leaders, and then we drink based on the oral culture that we will drink blood and then blah, blah, blah. It's a kind of bad habit that we're doing, but we never implement it.

cochrane: Nelson Belo says the martial arts groups remain a volatile part of East Timor's security situation.

belo: The fighting between martial arts groups in Timor Leste is still going on, it's very fragile and easy to provoke it. The politicians they keep using it.

cochrane: So, as the country looks toward election campaigns next year, there's both hope for peace and the fear martial arts groups could be once again be used as agents of violence in the neighbourhoods and districts of East Timor.

Foreign affairs & trade

Asean door already closed for Dili in 2011

Straits Times - May 5, 2011

Barry Wain – Government officials, analysts and academics continue to debate the merits of admitting Timor Leste this year to the Association of Southeast Asian Nations, seemingly unaware that the subject is closed.

Despite Jakarta's vigorous efforts to rally support for Timor Leste's membership, while Indonesia chairs Asean this year, the discussion has been moot since Singapore sent word in March that it would block the proposal.

As the regional organization works by consensus, meetings in Jakarta this week of Asean's highest decision-making bodies will confirm that Timor Leste must wait to become the 11th member.

Dili's application, lodged in March, has been circulated by Indonesia to the nine other Asean member countries, recommending that the matter be given "urgent attention." It will be considered by Asean senior officials today and by foreign ministers and the Asean Coordination Council tomorrow. It will die there, though the ministers may take the step of informing Asean leaders, at their weekend summit, that there is no consensus.

While the Asean Summit is still free to discuss any issue, Indonesia must weigh the diplomatic cost of taking the matter further. Indonesian President Susilo Bambang Yudhoyono, who has publicly promised to make every effort to realize Timor Leste's dream of becoming an Asean member, could suffer the indignity of being rebuffed if he were tempted to press Dili's case with fellow leaders.

The decision to admit Timor Leste, which suffered vast loss of life and property while it was occupied by Indonesia for 24 years before becoming independent in 2002, has been affirmed in principle.

Asean foreign ministers made it clear at a meeting with the Timor Leste foreign minister in 2007 that Dili was welcome to join the group. Philippine Foreign Secretary Alberto Romulo, who chaired the meeting, said it was no longer a question of "whether" but "when."

Asean, however, is split over whether Timor Leste, the poorest and least developed country in South-east Asia, is ready to fulfill all the membership obligations.

Singapore, which has registered the strongest objection, argues that Timor Leste lacks the institutions and competent officials to attend the 1,000 or more Asean meetings that are held annually.

Moreover, Singapore believes that the plan to create an Asean economic community by 2015 will be jeopardized by Timor Leste's entry, and that South-east Asia risks being squeezed into irrelevance in the shadow of booming China and India.

Despite Timor Leste's assurances to the contrary, there are also doubts about the fledgling democracy's political stability. Elements in the armed forces mounted a rebellion in 2007, and only three years ago, President Jose Ramos Horta was shot in an attempted assassination.

Vietnam, which had reservations from the start about Timor Leste's immediate admission, has become more forthright about them, according to regional diplomats.

Hanoi harbors historical fears about China's domination of South-east Asia, and worries that Beijing will hold sway over the region if Asean becomes irrelevant, the diplomats say.

Cambodia, Laos and Myanmar have hesitated to support Dili's admission for reasons other than a possible slowdown in community building.

Ranked 162nd in the United Nations Development Programme's 2009 Human Development Index, Timor Leste needs development assistance that Asean can provide.

But Laos, ranked 133, Cambodia, 137, and Myanmar, 138, fret that Asean may lack the resources to help one more very poor state.

Moreover, Timor Leste could pose serious competition to small member countries vying for foreign direct investment. Timor Leste aspires to be a free port, and is studying Singapore's development experience as a possible model.

Cambodia's lack of enthusiasm for Timor Leste's membership is particularly interesting and appears to represent a shift in position.

As recently as late March, Prime Minister Hun Sen assured President Ramos Horta, on a visit to Phnom Penh, that Cambodia would support its application, either this year or in 2012, when Cambodia is scheduled to chair Asean.

Despite the differences in Asean ranks, Indonesian Foreign Minister Marty Natalegawa has continued to champion Timor Leste's entry, supported by Thailand and the Philippines.

Many independent commentators also favour Timor Leste's admission, arguing for a show of sympathy after the country's bloody independence struggle and in favour of Jakarta's act of reconciliation.

In normal circumstances, Natalegawa might have stood a chance of persuading other members of Asean to change their mind.

But his efforts have been doomed since early March, within days of Timor Leste submitting its application, when Singapore formally put its position on the table, according to Asean sources.

Outlining its opposition, Singapore took the exceptional step of declaring that it was prepared to veto a consensus on membership, the sources say.

Singapore's rigid stand has caused an undercurrent of speculation and dissension within Asean ranks, but no public recrimination so far.

[Barry Wain is writer-in-residence at the Institute of Southeast Asian Studies.]

East Timor's push for an ASEAN-11

Asia Times - May 5, 2011

Megawati Wijaya, Singapore – The Association of Southeast Asian Nations (ASEAN) will weigh this week in Jakarta whether to bring East Timor, also known as Timor Leste, into the 10-member regional grouping. Dili's bid has received support from ASEAN's current chair and former ruler Indonesia, but other members have sounded warnings that East Timor's poverty and political instability could hamper the grouping's goal of forming an integrated community by 2015.

East Timor's foreign minister Zacaria Albano da Costa formally submitted the application to join in March and Indonesian Foreign Minister Marty Natalegawa has circulated a note requesting "urgent attention" from his foreign minister counterparts when they meet during the ASEAN Coordinating Council meeting on Friday. The council's recommendation will be submitted to ASEAN heads of government who will decide by consensus whether to accept the application during this weekend's summit meeting.

East Timor, one of the world's youngest and smallest countries, formally gained independence from Indonesia in 2002 following years of bloody struggle and a decisive vote for self-rule in a United Nations-backed referendum. The government now depends mainly on oil and gas resources to finance the country's budget. One of the biggest foreign projects, the Bayu Undan operated by Conoco Phillips in the Timor Sea, funds a US$5 billion sovereign wealth fund held in the US.

Despite those energy derived revenues, East Timor is Asia's least developed country, ranking 158th out of 179 countries in the United Nations Development Program's Human Development Index. Gross domestic product (GDP) in 2009 was a mere $558 million, lagging far behind ASEAN's current smallest economy in Laos, which recorded a GDP of $5.9 billion that same year. Half of East Timor's citizens live below the poverty line and unemployment currently runs at about 20%.

Although debt-free, East Timor is highly dependent on foreign aid. Reports from non-governmental agencies (NGOs) and the media claim that in the decade spanning 1999 to 2009 East Timor received somewhere between $5.2 and $8.8 billion, representing one of the highest per capita rates for international aid receipts in the world.

East Timor's backward economy has raised strong doubts on whether its entry into ASEAN would be more of a liability than asset to the grouping's timetable for a trade and investment promoting integrated community by 2015.

Declared at the ASEAN summit in Cebu in January 2007, a plan for an ASEAN Economic Community (AEC) envisions an integrated region where goods, services, capital and skilled labor would flow more freely than at present. The concept is built upon the wish to leverage the region's collective strength to compete for foreign investments, particularly against big countries like China and India.

An AEC blueprint, approved in 2007, laid out a strategic schedule for implementing measures including procedures to eliminate tariff and non- tariff barriers and achieving more all-encompassing goals such as creating a more competitive economic region.

Experts at a seminar at the Institute of Southeast Asian Studies (ISEAS) in Singapore last month cast doubts on whether East Timor, with its limited monetary and human resources and lower level of economic development, will be able to meet all of those requirements any time soon.

Termsak Chalermpalaunupap, director of the political-security directorate department at the ASEAN Secretariat in Jakarta, expressed concerns on whether East Timor, with its limited number of qualified civil servants, will be able to attend all the ASEAN meetings that number about 1,000 annually from the ministerial, official and expert levels.

Unlike other groupings such as the European Union that function through democratic voting, ASEAN makes decisions through consensus. As such, anytime a member state is absent it slows down decisions.

"ASEAN is now a legal entity, with a charter and legal agreements like the [ASEAN Free Trade Agreement]. Will East Timor be able to accept and carry out all these obligations?" asked K Kesavapany, ISEAS's director.

Others have expressed concerns that East Timor may seek exemption from the obligations, resulting in a less cohesive and credible ASEAN community. Given East Timor's unsteady politics, some have recommended that it would be better to give it an "associate membership" that can be converted to full membership once it has met all ASEAN requirements.

Resource constraints

During a March visit to Jakarta, East Timor president Jose Ramos-Horta gave his assurances that East Timor was not asking for financial help from ASEAN. Foreign Minister da Costa also told Indonesian media that East Timor has in place a road map to grow together with ASEAN so that it "won't be a burden" to member countries. ASEAN membership, he said, would boost the country's image and allow it to learn from its neighbors.

"Some of the concerns raised are legitimate... We emerged from a conflict, but we have proven that we have managed to recover quickly," he said.

Despite its resource constraints, East Timor has set up an ASEAN National Secretariat, participated in various ASEAN Regional Forum meetings, and invited ASEAN to send observers to monitor its 2012 general election. Roberto Soares, East Timor's ambassador to Singapore and Brunei, made his case for entry by saying his country is "the lost child of ASEAN seeking to rejoin its family".

Significantly, Indonesian President Susilo Bambang Yudhoyono's government has publicly supported East Timor's bid. "[The president] has hinted support for East Timor to join ASEAN. It is time for East Timor to be part of ASEAN," Yudhoyono's aide Teuku Faizasyah said during the official visit of Horta in Jakarta.

In an interview with the media last month, Indonesian Foreign Minister Marty Natalegawa said that continuing to exclude East Timor from ASEAN would be "economically unnatural" and "politically destabilizing" for the region in the long term.

Other ASEAN members have not publicly stated their official positions, though insider government sources said that Singapore and Malaysia have objected on the grounds that East Timor is not ready economically to meet all of the EAC's requirements.

"The other ASEAN member governments would no doubt be reminded of a previous instance when membership was granted on grounds other than technical ones and ASEAN had to live with the consequences of that decision and continues to do so even today," said Kesavapany.

ASEAN last opened its doors to Vietnam, Myanmar, Laos and Cambodia between 1997-1999. Questions were then raised about whether it was wise to admit four countries that had far lower levels of economic development than the grouping's six original members, the Philippines, Thailand, Indonesia, Singapore, Malaysia and Brunei. (There was also controversy over whether to admit military-run Myanmar until it undertook substantial political reforms.)

According to the ASEAN declaration of 1967, the only conditions for "participation" in the grouping is to be located in the Southeast Asian region and adherence to the grouping's stated aims, principles and purposes.

"There are no other conditions for membership, certainly none in terms of the behavior of states towards their citizens and other people in their territories, none in terms of political or social systems, and none in terms of economic policy other than those pertaining to regional economic integration and cooperation," wrote former ASEAN secretary general Rodolfo Severino in his 2006 publication Southeast Asia in Search of an ASEAN Community.

"This is why, when people ask why ASEAN accepted Myanmar and three other newer members [Vietnam, Laos, and Cambodia], the question may be posed in riposte: on what grounds should ASEAN have rejected them?"

Severino has argued that progress with ASEAN's economic integration plans has not been hampered by the admission of the four less-developed members so much as by the six original members' policy positions and implementation delays, including those involving the dismantling of non-tariff barriers, negotiations on trade in services and the implementation of agreements on goods in transit.

Instead, he has argued the ASEAN-4, as the newer members are sometimes referred to, has given investors "a wider choice of where to place their investments in the free trade area according to the availability and cost of the required labor, the accessibility and cost of other resources, the effectiveness and enforcement of the legal and policy regime, and the overall investment climate, and so on."

In that subtext is a compelling argument for East Timor to make up an ASEAN-5 and formally join the grouping this weekend.

[Megawati Wijaya is a Singapore-based journalist. She may be contacted at megawati.wijaya@gmail.com.]

Analysis & opinion

Natural resource wealth management

Philippine Daily Inquirer - May 14, 2011

Edilberto C. de Jesus – The effects of the violence visited on the East Timor capital of Dili by the fighting among its fragmented communities were still plainly visible during my first trip in February 2007.

Refugee camps greeted travelers emerging from the Dili Airport, checking into the city's landmark Hotel Timor, and attending services at the Catholic cathedral.

Experts estimated that it would take the East Timor government a decade to address the problem of nearly 160,000 internally displaced persons (IDPs), about 15 percent of the population.

On my second visit three years later, the IDP camps had vanished. It was possible for foreign visitors to step out of the hotel at night for a dinner in a city restaurant. In two years, the government cleared the IDP camps, drawing from the windfall earnings flowing from its offshore oil and gas fields.

From two fields brought into production in 2004, the government began to generate significant revenues, for which it established the Petroleum Fund in 2005. The Petroleum Fund received the revenues, invested them in safe assets, and used the investment earnings to supplement the budget. The government that assumed power in August 2007 quickly decided to use the Petroleum Fund resources to cover the cost of resettling the IDPs.

The government recognized the need to husband the finite wealth from its natural resources for the long-term development needs of the country. The initial yield of $2 billion per year would taper off, but the fields would contribute over their 20-year productive life $30 billion to the treasury. To supplement the budget, the government could automatically withdraw each year the "Estimated Sustainable Income" (ESI), computed on a formula based on the current balance of the Fund, now $7.7 billion, and the present value of future oil revenues.

But the people must benefit from the wealth produced by natural resources. Speaking at a session on Natural Resource Wealth Management at the Asian Development Bank's annual meeting in Hanoi in early May, Timor Leste Finance Minister Emilia Pires underlined the need to address or avert political crises arising from the failure to alleviate the people's poverty. It was not politically tenable to maintain a condition where the country was rich but the people were poor.

Timor Leste learned from earlier experience how to deal with the "Dutch Disease." The Netherlands in the 1960s and the United Kingdom in the 1970s, like Timor Lester, profited from the exploitation of energy sources – in their case, natural gas deposits in the North Sea. The rise in revenue led to the appreciation of the Dutch guilder and the British pound, raising the cost of their manufactured products and making them less competitive in the world market.

Oil revenues also fueled inflation in Timor Leste and caused a surge in the prices of basic commodities. Defying experts concerned with wasteful and unsustainable subsidies, the government used the oil funds for an Economic Stabilization Plan that allowed it to intervene in the market, curb inflation and avoid a food crisis. The Petroleum Fund Law does give the government the flexibility to exceed the withdrawal limits but it must justify the need to Parliament, whose approval it must secure.

To protect the Petroleum Fund from misuse, including populist pressures for dole-out grants, the government established a system for its management that stressed professionalism, accountability and transparency. Operational responsibility for the Fund rested with the East Timor Banking and Payment Authority, supported by the Bank for International Settlements and the Schroeder Investment Management Ltd.

The government has recently placed its financial information on a website (Timor Leste Transparency Portal) and provided 24/7 access to 10-year financial and budget data. Public access to information would promote accountability, reduce the risk of corruption, and raise the confidence of investors in the country. But beyond these instrumental objectives, Minister Pires stressed transparency as required by the right of the people to know how their resources are being managed and for whose benefit.

The Revenue Watch Institute and Transparency International recognized Timor Leste's efforts, placing it in the group of countries most transparent with government revenues. In 2010, it achieved full compliance with the Extractive Industries Transparency Initiative, only the third country in the world to meet this standard.

With justifiable pride, Minister Pires recounted what the government was able to achieve through the systems it established for the judicious management of the country's natural resources: an improvement of 14 places in the Human Development Index rankings, 19 places in the Corruption Perception Index, and 7 places in the World Bank Doing Business Report. Even more important, Timor Leste between 2007 and 2009 reduced the poverty incidence from 50 percent to 41 percent.

The world's youngest nation is providing lessons for older countries that oil need not necessarily become a curse. Timor Leste has demonstrated that it can manage effectively the wealth flowing from natural resources. The next challenge is to develop the capacity of its people, through education and training, to manage the natural resources to ensure that they produce wealth on a sustainable basis.

[Edilberto C. de Jesus is president of the Asian Institute of Management.]