Guido Goulart, Dili – A powerful earthquake hit waters off East Timor on Tuesday, but officials said it was too deep to trigger a tsunami. There were no reports of injuries or damage.

The US Geological Survey said the 6.8-magnitude quake struck 171 miles (276 kilometers) from the capital, Dili, and was centered 300 miles (465 kilometers) beneath the Banda Sea.

That was too deep to generate destructive waves, the Pacific Tsunami Warning Center said in an e-mailed statement. Most residents living in Dili said they didn't feel the quake.

"We weren't even aware," said Santina Araujo, a mother of two who attending a church gathering with other housewives. "Everything is normal here, no panic or anything."

East Timor is prone to seismic upheaval due to its location on the so- called Pacific "Ring of Fire," an arc of volcanos and fault lines encircling the Pacific Basin.

Police & military

Forgive and forget as Dili signs Jakarta defence pact

The Australian - August 29, 2011

Mark Dodd – East Timor's small army will be supplied with Indonesian weapons after the signing of a ground-breaking agreement between the two countries that were once deadly enemies.

Australia has 380 military personnel in the half-island state and has a close security relationship, but some in the capital, Dili, complain that Canberra can be excessively bureaucratic in its dealings on defence.

On a recent visit to Dili, Indonesian Defence Minister Purnomo Yusgiantoro and East Timorese Prime Minister Xanana Gusmao, who also serves as Defence Minister, signed a memorandum of understanding covering security co- operation, including training and military logistical support.

The deal was expected to be quickly ratified by the East Timor parliament, diplomatic and government sources in Dili told The Australian. It is understood the agreement will also cover the training of East Timorese military and police officers.

At the signing on August 8, Mr Gusmao and Mr Yusgiantoro were pictured hoisting aloft an Indonesian-made light machine gun of a type to be acquired by the East Timor Defence Force. The weapon is a local variant of the Belgian 5.56mm FN Minimi.

The agreement will also provide for the establishment of a Timor Leste- Indonesia Defence Co-operation Joint Committee to co-ordinate broader areas of co-operation.

The agreement also covers co-operation on aviation, although no details of this have emerged. However, there have been suggestions that East Timor wants to acquire military helicopters.

Defence Minister Stephen Smith said last night that the government welcomed any positive development in security co-operation between East Timor and Indonesia.

"Australia has an unwavering commitment to the long-term security and prosperity of East Timor," Mr Smith said. Australia had close defence co- operation with East Timor in areas including engineering, maritime security, logistics, financial management, communication and English- language training.

East Timor has gone to diverse sources for its military equipment and has patrol boats from Portugal, South Korea and China.

The executive director of the Australian Strategic Policy Institute, retired major general Peter Abigail, said that the new East Timorese defence link with Indonesia was a very positive move.

It made a lot of sense for Australia, Indonesia and East Timor to have a strong collective relationship and good relations with one another, Major General Abigail said. He said that Australia would remain very deeply involved in training the East Timorese forces and advising the Dili government.

Clinton Fernandes, a lecturer at the Australian Defence Force Academy, said East Timor clearly wanted to improve relations with a powerful neighbour. "East Timor is diversifying its contacts in the region and clearly wants good relations with them all," Dr Fernandes said.

East Timor disbands pro-independence armed unit

Agence France Presse - August 20, 2011

Dili, East Timor – East Timor on Saturday officially disbanded pro- independence armed unit Falintil who had fought against Indonesian occupation of the country for more than two decades.

"Today in a military ceremony and parade, the Timor Leste government has symbolically disbanded armed wing Falintil which for 24 years was... in the forests to fight for Timor Leste's independence," President Jose Ramos- Horta said, using to the country's formal name.

"They are admirable and brave warriors, have strong faith, and did not think a lot about... risks. They [survived] from one year to another to sing the dream of independence," Ramos-Horta said.

The government honored 236 men and women from the armed wing at the ceremony, which was also attended by several officials from Indonesia.

East Timor, a former Portuguese colony, was occupied by Indonesia for 24 years from 1975, a period marked by widespread human rights abuses leading to the deaths of up to 200,000 people.

The tiny nation gained formal independence in 2002 after winning its freedom in a 1999 UN-backed referendum marred by violence.

A reconciliation commission established jointly by East Timor and Indonesia found in 2008 that while gross human rights were committed by Indonesian forces, there should be no more trials and no further arrests.

East Timor has a wealth of energy resources but remains one of the poorest countries in Asia, with most people dependent on foreign aid.

Health & education

East Timorese women slow to adopt safer birth practices

IRIN News - August 10, 2011

Asulao Sare – Babies are plentiful in Timor Leste – almost seven per woman on average – and so too are health problems in a country where chronic malnutrition is rampant and access to effective healthcare remains a luxury.

That is why dozens of mothers from communities throughout the sub-district of Hatolia have travelled to the village of Asulao Sare, some walking more than an hour, for a check-up for themselves and their children from a visiting doctor.

"It started slowly, two years ago, with just this village, but now people come from far away," says Aida Goncalves, a US-trained Timorese doctor who works for the international NGO Frontline.

Goncalves makes the three-hour trip here from Dili, the capital city, three times each month to see the patients, diagnose their ailments and distribute medication.

Dangers

High birth rates, combined with the health and nutritional problems associated with severe poverty, make birth a dangerous affair for mother and child.

One example is a 41-year-old mother of eight, whose newborn has an imperforate anus (the passage is closed) and appears to have Down's syndrome.

"The health workers told me before that it was dangerous to my health to have many children and that it would be difficult to feed all of them, but I didn't agree."

Now, after her latest birth, she has accepted contraception. But Goncalves sees the cycle repeating itself.

Domingas dos Santos, 25, is four months pregnant; she already has children of eight months, two, four and five years old. "I've been told about birth control and family planning but I'm not interested," Dos Santos says.

A private affair

Rural Timorese view family planning and pregnancy as a private matter and the idea of consulting outside the family is foreign.

Three-quarters of births are unattended by trained health professionals and fewer than a third of families practise family planning, says Ross Brandon, an Australian doctor with Clinica Cafe Timor, the medical arm of the coffee cooperative Cooperativa Cafe Timor.

Studies have long shown birth spacing – the practice of regulating the intervals between pregnancies – significantly reduces maternal and infant health risks.

Among Timorese children, nearly half are underweight and more than half are stunted, according to government statistics. The risk of such problems is reduced dramatically when mothers have at least two years to recover between pregnancies, say health experts.

Acknowledging that culture, habit, and logistical concerns, such as financial and transport limitations, prevent many rural families from seeking professional help, groups such as Frontline and Clinica Cafe Timor are training community members to serve as midwives.

It is a role that Marcelina Suarez, a 37-year-old farmer and mother-of-six, has assumed with pride. She admits her medical skills are limited but even just ensuring that simple standards such as cleanliness are adhered to in childbirth can make a considerable difference. Of the nearly 50 babies she helped deliver last year, all have survived.

Outlining further improvement

Infant and maternal health in Timor Leste has improved in leaps and bounds over the past two decades.

In the 1990s, when the country was chaffing under a violent Indonesian occupation, the under-five mortality rate for children was 184 per 1,000, according to the UN Children's Fund (UNICEF), by 2009 that figure had fallen to 56.

In July, the government set goals for further improvements. The Strategic Development Plan 2011-2030, drafted by the Prime Minister's office, stipulates that by 2015 about two-thirds of pregnant women will receive regular pre-natal check-ups and give birth with the assistance of a government-trained health worker.

Health workers support this goal but believe meeting it will likely take longer.

In the meantime, the slowly growing body of community midwives is promoting pragmatic changes with limited means. "Just getting pregnant women to think ahead about the day when they'll give birth is an improvement," says Suarez. (bb/ds/mw)

Social & communal conflicts

East Timor ministers condemn gang violence

ABC News - August 19, 2011

Sara Everingham – East Timor's Council of Ministers has condemned recent violence in the country's south-west that left more than 100 families homeless.

A police officer was killed and the government said 79 houses were burnt or destroyed in the violence last Sunday in Kovalima district. The clashes involved members of martial arts groups, local media reported.

East Timor's Council of Ministers said those responsible must be brought to justice. "The government expressed serious concern about the incident and crimes and urge for due punishment to take place without delay," spokesman Agio Pereira said.

He said an investigation will examine to what extent martial arts groups were involved in the violence.

Houses razed in East Timor mob rampage

Agence France Presse - August 16, 2011

Dili – Angry mobs of martial arts gang members set fire to dozens of homes Monday as they rampaged through an East Timorese town after one of their number was killed in a stabbing, police said.

More than 100 houses as well as vehicles caught fire in the unrest in Zumalai, on East Timor's southern coast, a police officer told AFP on condition of anonymity.

He said the violence was "triggered" by the stabbing of a gang member, who was also a police intelligence agent, in the town on Sunday.

"Three people are now in police custody. The security condition there is now under control," the police source said. A military source who also refused to be identified confirmed the circumstances of the unrest.

Martial arts gangs are common in East Timor, a tiny half-island state which achieved independence from Indonesia in 2002 following a bloody referendum.

United Nations police returned full control of East Timor to the national force in March, more than four years after clashes between rival factions of the security forces threatened to push the country into civil war.

The UN will maintain a presence of up to 1,280 police to support local police until after a presidential election in 2012, when the UN peacekeeping mission plans to withdraw from the southeast Asian state.

Keeping the peace in East Timor

Jakarta Globe - August 3, 2011

Cherie Hart – Long-running violence in a district just outside East Timor's capital ended last week with a dance, a prayer, a speech and the sacrifice of a goat and a pig.

For years, rival youth groups of two communities in the hilly subdistrict of Metinaro, not far from Dili, fought fiercely over land issues. Nothing, it seemed, could put an end to their aggression – until now.

A ceremony, known locally as Tara Bandu, brought villagers together to make a communal promise. Nearly three dozen members of three rival martial arts groups and elderly representatives from two villages signed a document pledging to respect the environment, cease using violence to solve their disputes, stop trying to occupy each other's land and end hunting in protected areas. More than 500 villagers witnessed this traditional ritual that ended with an animal sacrifice to seal the deal.

"We talk about democracy, but we forget how to respect each other," said Adao de Araujo, Metinaro district administrator. "We have now found a way to love our community and stop violence."

This celebration of peace marked the culmination of a three-month "community dialogue mediation" that combined formal negotiation techniques with informal and traditional methods of dispute resolution. The United Nations Development Program has been working with the East Timor government to strengthen its ability to keep these kinds of local disputes from turning into larger conflicts.

"The Tara Bandu shows how far Timor-Leste as a country has come in dealing with conflict," UNDP country director Mikiko Tanaka said, referring to the official name for the nation. "The Timor-Leste dialogue and Tara Bandu for peace is unique in that it combines local cultural customs and more modern mediation methods."

A $3-million UNDP program recently provided technical and financial assistance to create the Department of Peace-Building and Social Cohesion within the Ministry of Social Solidarity and train national mediators in the districts of Ermera, Dili and Baucau. This new government department for peace-building intends to intervene in local disputes when they turn violent and villagers are unable to reach agreements on their own.

Training is also offered for community and traditional leaders, council members and in dialogue facilitation and mediation. Some of these newly trained mediators helped resolve the Metinaro dispute.

Martial arts clubs, often accused of being breeding grounds for gangs, are an important social grouping in East Timor, where unemployment is high, and nearly 80 percent of the population is under 25.

"We have to create peace, unity and stability," said Felix Rodrigues, a representative from one of the martial arts groups that signed the pledge. "Future problems cannot be solved with violence, but instead we have to bring them to local authorities to find our own solutions."

Sources of conflict remain in East Timor's communities, sometimes as residual resentment from a 2006 national crisis that stemmed from grievances within the police and military. The two-year conflict, which was loosely based on regional lines, caused more than 150,000 people to flee from their homes and take up residence in 65 camps scattered throughout Dili and the districts.

As they moved back to their homes, antipathy developed toward the returnees, as did disputes over land and property, rivalries among martial arts groups, political and regional divisions, and disquiet among the large ranks of unemployed.

Recognizing that building peace and social cohesion takes time, the Ministry of Social Solidarity decided to establish the Department of Peace-Building and Social Cohesion. The ceremony in Metinaro marked the third local conflict that reached a resolution through assistance from the new department, which was set up in December.

As East Timor prepares for national elections and the exit of the UN peacekeeping mission next year, sustaining peace is all the more important in this young country.

International solidarity

Timorese students support West Papua, three arrested in Dili

East Timor and Indonesia Action Network (ETAN) - August 17, 2011

A friend in Dili tells ETAN that police recently broke up a demonstration in support of West Papua. As we get more information, we will post updates on ETAN's blog here.

The morning of August 17, more than 30 Timorese students called for the right of West Papuan to self-determination and condemned human right violation by the Indonesian military and police against Papuans. The demonstration took place in front of Indonesia Embassy in Farol, Dili, on the 66th anniversary of Indonesia's independence proclamation.

Timor-Leste Police (PNTL) arrested three of the protesters – Juventina Correia Ximenes, Domingos de Andrade and Letornino da Silva. All are currently studying at Timor-Lorosae National University, UNTL.

One of demonstrator, Nolasco Mendes, said that the PNTL treated the activists brutally. Police reportedly arrested the activist after the Indonesia Embassy asked the PNTL to stop the demonstration.

According to a Timornewsline report the pro-Papua protesters were members of the Students Solidarity Council (Dewan Solidaritas Mahasiswa Timor- Leste) which previously fought for Timor-Leste's independence.

Timor-Leste has a strict law on demonstrations which among other things requires four days notice and bans them within 100 yards of a government or diplomatic building.

Foreign affairs & trade

Timor-Leste weighs up Asean membership

Irrawaddy - August 30, 2011

Simon Roughneen, Dili – Across the city, banners and posters signal the new country's increasing integration with the world outside, heralding events such as Timor-Leste's hosting of the EITI (Extractive Industries Transparency Initiative) regional conference on Aug. 25-27.

Timor-Leste was designated the first Asian country to match up to EITI standards on accountability in and management of its energy resources. According to World Bank Managing Director and former Indonesian Finance Minister Sri Mulyani, speaking at the EITI event, "Timor-Leste, as a nation, is building strength and economic resilience and has demonstrated how much can be won in a short space of time."

The EITI is a voluntary mechanism, usually backed by member countries passing relevant laws. It claims it "supports improved governance in resource-rich countries through the verification and full publication of company payments and government revenues from oil, gas and mining."

The plaudits from EITI and the World Bank are a notable achievement for East Timor, which as recently as 2006 teetered on the brink of civil war. However, concerns remain about corruption among the country's politicians and officials, with public displays of ostentation such as newly acquired expensive cars and big houses seemingly stoking resentment among ordinary Timorese, for whom the country's energy-based economy is almost an abstraction.

"People ask, how can a civil servant who earns US $500 a month afford to buy his son or daughter a brand new SUV?" said Rogerio Lobato, a former Interior Minister convicted of gun-running during Timor-Leste's 2006 crisis, when 10 percent of the population was driven from their homes as security force factions fought on the streets. Lobato says he intends to run for president in the 2012 elections in Timor-Leste.

For the country's political leaders membership of the Association of Southeast Asian Nations (Asean) is a key foreign policy goal, superseding membership of or achievements within other international or regional organisations such as EITI.

President Jose Ramos-Horta banged the drum for his country's accession in an article published in May as the the most recent Asean summit in Jakarta, the capital of Timor-Leste's former occupier Indonesia, weighed-up Dili's request to join the bloc.

Ramos-Horta pointed out that his country outranks Asean members Burma, Cambodia and Laos in the latest United Nations Development Programme's (UNDP) Human Development Index (HDI), a league table that lists countries by what the UNDP deems as "a development paradigm that is about much more than the rise or fall of national incomes."

The president said that Timor-Leste's GNP per capita "increased 228 per cent" over 2005-10 "to more than $5,000." The country's economy is growing rapidly, as recent 10 percent per annum expansion figures show, but this is down to energy revenues coming online and government spending on the back of the largesse.

However, non-oil/gas income per head is thought to be less than $400 per person, and is a much more accurate reflection of poverty levels in Timor- Leste, where unemployment is high – reaching 40 percent among among urban youth. Migration to Dili threatens to see Port Moresby-type slums emerge on the city's edges, where a deeply rooted gang culture lives on, and a controversial and tricky land law could see many of Dili's residents be deemed squatters – and therefore vulnerable to eviction at any time – by the government.

However, similar challenges are present – to greater or lesser degrees – in some Asean member states, and to Timor-Leste's allies inside the bloc, this should not automatically disqualify the aspiring new member. In May, current Asean chair Indonesia recommended that Dili's accession request be given "urgent attention" by the nine other Asean members. Singapore has been the sole Asean member to publicly question Timor-Leste's accession, saying that the former Portuguese colony, host to a long-standing UN mission and international peacekeeping force, is not yet ready to take on the bureaucratic workload that Asean membership requires.

There is broad agreement between the current Government in Dili – a multi-party coalition led by former anti-Indonesian resistance leader Xanana Gusmao – and the main opposition party Fretilin. Party spokesman and Fretilin MP Jose Teixeira told The Irrawaddy his party sought membership of Asean as far back as 1974, when Portugal ended its colonial rule. "We want everyone to know it is a bipartisan policy," he said.

However, some in Timor-Leste agree with the Singapore line that it is too soon for Timor-Leste to join the 10-member Southeast Asian bloc, which aims to establish an 'Asean Economic Community' by 2015.

Lao Hamutuk, a Dili-based NGO that monitors political and economic developments in Timor-Leste, said it believes that Asean membership would swamp the import-dependent Timorese economy and hinder the development of the non-oil/gas economy. The sector employs only a handful of Timorese but accounts for over 90 percent of the state budget, amid ongoing mass joblessness and what LH researcher Juvinal Dias describes as "almost no local production." He adds: "We cannot yet compete with other countries in economy or agriculture."

Part of Singapore's argument against Timor-Leste joining Asean sooner rather than later is historical – with some misgivings lingering over the accession of Burma, Cambodia, Laos and Vietnam in 1997. Timor-Leste argues that it is in better shape to join than any of this four were at that time, pointing not only to the UNDP data, but to its far better democratic credentials.

However, Timor-Leste's eventual accession to Asean may not be as productive as supporters of the move hope, or as damaging as opponents fear, if precedent elsewhere is anything to go by.

Sean Turnell, an academic at Macquarie University in Australia, and founder of Burma Economic Watch, said, "Asean has had very little effect, I would say, on Burma's economy – i.e., in the sense of changing any patterns in investment, trade, etc. These are all driven by much more fundamental forces than bureaucratic structures, but instead on the availability of resources, at the right price, and so on. In other words, Thailand does not buy Burma's gas just because they are both members of Asean."

Mulyani applauds Xanana Gusmao during visit

Jakarta Post - August 25, 2011

Jakarta – World Bank managing director Sri Mulyani Indrawati commended Timor Leste Prime Minister Xanana Gusmao for his administrative and financial reform policies during the former's visit to Dili on Thursday.

"I would want to be a finance minister, if the prime minister is someone like you. Congratulations for all efforts that have been made by your government," said Mulyani, a former finance minister of Indonesia.

Mulyani also praised Timor Leste's "Strategic Plans", which is a set of development plans of the country for the next 20 years, Timor Leste prime minister office spokesman Naikoli Antonio Ramos said in an e-mail sent to Antara news agency.

Naikoli said, citing Mulyani, that Timor Leste needed such plans to optimize its use of its oil reserves to support its national development.

Gusmao was accompanied by Timor Leste Deputy Prime Minister Jose Luis Gutteres and his entire cabinet in the meeting with Mulyani. The prime minister handed over a "friendly gift" to Mulyani after the meeting, although his office stopped short of saying what it was.

China awakening to strategic value of East Timor

Macau Hub - August 1, 2011

Specialty media have recently reported that China "has sought to take better advantage of the strategic value" of East Timor, "especially bearing in mind the prevalent regional and international context", the analyst states in a recent report on East Timor.

Seabra indicates that Beijing contacted the East Timorese authorities in late 2007 with a view to installing radar to monitor navigation in the strategic Wetar Strait.

Although the project did not go through, the analyst cites Prime Minister Xanana Gusmao, who in September 2010 said that Dili is "firmly committed to increasing bilateral cooperation in the military area with friendly countries that offer disinterested support" and that "the Chinese brothers and sisters are clearly part of that group".

China offered East Timor buildings to house the Presidency and Foreign Affairs as well as the Centre for Diplomatic Studies, whose mission is to improve the training of the country's diplomats.

Besides infrastructures, cooperation between the two countries has extended to agriculture with the development of an innovative project to introduce hybrid rice.

Trade between China and East Timor has risen sharply since 2008, this year registering the biggest increase among the eight Portuguese language countries.

Official Chinese figures show that imports from and exports to East Timor were up more than 110 percent this year.

In the last three years East Timor has recorded strong economic growth of around 12 percent. At the third ministerial conference of the Forum for Economic and Commercial Cooperation between China and the Portuguese Language Countries, East Timorese President Jose Ramos Horta said that business relations between East Timor and China should allow a beneficial investment "boom" – in hotels, restaurants, construction materials, electrical appliances, furniture and small businesses.

He also highlighted "the manifestations of solidarity and support from the governments of the People's Republic of China and the Macau Special Administrative Region (...) since 2000 through the offer of equipment, financing of Timorese personnel, hosting students at the University of Macau and other universities funded by 25 scholarship grants from the Chinese government and the Macau authorities".

Pedro Seabra states in his report that "it is increasingly clear that East Timor is slowly but carefully weaving an elaborate geopolitical tapestry" based on diversifying its partners while remaining aligned with Australia and thereby also with the United States. (macauhub)

Mining & energy

East Timor parliament approves change to Oil Fund Law

Macau Hub - August 26, 2011

Dili, East Timor – The East Timor parliament Tuesday approved the first change to the country's Oil Fund Law to allow greater flexibility and return on investments.

The change to the law approved by 34 votes in favour, three against and two abstentions, according to the document for the change of law to which Portuguese news agency Lusa had access.

"The current law aims to change the rules and principles of investment, allowing greater flexibility in terms of diversification of the portfolio of applications in order to increase, in the future, return on investments," the document said. (macauhub)

East Timor demands natural gas from Sunrise field be processed in Timor

Macau Hub - August 23, 2011

Dili, East Timor – East Timor continues to demand that the natural gas from the Sunrise field, in the Timor Sea, be processed in the country, East Timor's deputy Prime Minister, Jose Luis Guterres, said after a meeting in Dili with the new chairman of Australian oil company Woodside.

"We want the Sunrise pipeline to come to East Timor, as the treaty with Australia talks about the fair distribution of the resources and that those resources should benefit the people of East Timor and Australia," said Portugal's Lusa news agency citing Guterres.

Guterres said that, "there is no justification for Australia already having benefited from a pipeline for development of the gas in Darwin and that East Timor has none."

Woodside believes that processing natural gas in East Timor would cost an additional US$5 billion, compared to its preferred option of using a floating rig. The Australian company noted that, "The option of a floating gas rig is the most economically robust, maximises total revenue for Australia and East Timor and return for the Sunrise consortium."

The Dili government does not accept Woodside's proposal and demands that the gas be processed in East Timor. The difference of opinion between the two countries has dragged on for over a year. (macauhub)

Woodside seeks Timor circuit breaker

Brisbane Times - August 18, 2011

Peter Ker – The new Woodside Petroleum boss, Peter Coleman, will make a diplomatic mission to East Timor in a bid to revive hopes of building a major gas project in the waters between the tiny nation and Australia.

Mr Coleman's promise to meet the East Timorese Prime Minister, Xanana Gusmao, in the "not too distant future" came as Woodside revealed a first half-profit of $US828 million ($791.2 million).

The solid result was broadly in line with the expectations of most analysts, who were more focused on Mr Coleman's outlook for Woodside's suite of ambitious growth projects: the Pluto, Browse and Sunrise gas projects.

While some minor deadlines continue to slip, most analysts were relieved that Mr Coleman did not reveal further major delays to the Pluto LNG project, which in June was revealed to be a year behind schedule and $900 million over budget.

Mr Coleman said Woodside still did not have enough of its own gas to build the second stage of the Pluto project, but he said negotiations to source the required gas from neighbouring companies were "maturing" and were close to completion.

Woodside was expected to make a final investment decision on the second stage of Pluto this year and start ordering the "long lead items" this month.

Mr Coleman was unable to guarantee those timelines yesterday, but analysts at Goldman Sachs were not deterred, saying "we believe Pluto is a viable expansion opportunity and view the current share price as a compelling entry point for investors".

Mr Coleman said he still expected to take a final investment decision on the $35 billion Browse LNG project in mid-2012, despite conceding the schedule was "a challenging one".

The Sunrise gas project – which straddles Australia's territorial border with East Timor – is one of the most uncertain projects on Woodside's books, thanks to disagreement between the company and the East Timor government over how the gas should be processed.

East Timor wants a processing plant to be built on its shores to stimulate its economy and has been angered by Woodside's insistence on using a floating LNG plant.

Mr Coleman said he would travel to East Timor to better understand the nation's concerns and to try to uncover a "circuit breaker" to the impasse. However, he rejected suggestions he was about to cede ground over the floating option.

"It's too early for us to move away, or even have discussions around a different development concept for Sunrise," Mr Coleman said. "... we "We really do believe we have the right development concept."

Goldman Sachs said market sentiment towards Woodside's growth projects may improve after four months when a sceptical market savaged Woodside's share price by more than 40 per cent. Woodside shares close 44" higher last night at $37.76.

Economy & investment

East Timor economy to post growth of 10 pct this year

Macau Hub - August 20, 2011

Manila, Philippines – The East Timor economy is expected to maintain growth of 10 percent this year, driven by a rise in oil prices and by public investment, the Asian Development Bank (ADB) said in a report published Monday in Manila.

According to the ADB report on Pacific economies, East Timor is the Pacific economy that is expected to post greatest growth this year followed by Papua New Guinea (8.5 percent), driven by the rise in oil prices and public investments and mining revenues.

The Solomon Islands are expected to see the third highest rate of economic growth, of around 7.5 percent, driven by an upturn in gold mining and a rise in logging. (macauhub)

Analysis & opinion

Timor's oil: Blessing or curse?

Asia Times - August 31, 2011

Guteriano Neves – Oil has different meanings for different societies. For developed societies like the United States, Japan, and Western Europe, oil is like an addictive drug that people only want more and more of. It enables them to go everywhere. It helps them cook and regulate the temperature of their dwellings. Without oil, people in these societies couldn't sustain their way of life. For these reasons, many countries go to war for the sake of securing access to oil.

However, oil has different significance for developing countries whose economies heavily depend on exporting oil and gas. When oil was discovered in their territory, it was their expectation that oil exports would help to boost their domestic economy through creating jobs, improving human resources, developing the non-oil economy, building infrastructure, and funding other social services. But this has rarely come to pass.

Most countries in the global south that depend on oil have discovered that oil comes with disaster, civil war, foreign intervention, human rights violations, authoritarian regimes, environmental degradation, corruption, social inequality, and endemic poverty.

Chad, Nigeria, Angola, Ecuador, and Iraq are only a few of the countries to learn this difficult lesson. Peter Maas in his book "Crude: The Violent Twilight Oil" elegantly put it this way, "one of the ironies of oil-rich countries is that most are not rich, that their oil brings trouble rather than prosperity."

Christian Aid, in its report "Fuelling Poverty: Oil War and Corruption", found that at the global level, the oil economy is irrelevant to poor people, who have no access to electricity or to cars, and whose fuel comes not from oil but from wood. As Nnimmo Bassey, a Nigerian poet and current president of Friends of the Earth International, once wrote, "We thought it was oil, but it was blood."

Timor's oil

The situation is even more complex in post-conflict countries like Timor- Leste (TL). Indonesia, which occupied Timor-Leste illegally for decades, signed most of the oil deals with oil companies like ConocoPhilips and Woodside. When Timor-Leste won its independence in 2002, it had no freedom to make its own decision about its natural resources. Much of the revenue, which should have belonged to Timor-Leste, was already flowing to Australia and Indonesia. Moreover, Timor-Leste's non-oil economic sectors remains very poor, and sturdy public institutions aren't in place. Those that are in place are still fragile, and law enforcement is weak. This means that the risk of corruption involving high officials and oil companies is very high given the weak oversight mechanisms. High dependency on oil is leading Timor-Leste to what scholars call a rentier economy, in which the state generates its revenues not from taxing its citizens but merely from extracting oil. This in turn undermines the state's relationship with its citizens, and citizens are less likely to demand accountability from their officials.

After the Indonesian military destroyed the country, the Timorese were left in a state of disarray. Around 80% of infrastructures were destroyed, public administration was in collapse, 50% of the population was illiterate, and other social and economic problems proliferated as well. Billions of dollars spent by the international community in the form of foreign aid did not lift up the country's economy.

In this circumstance, Timor-Leste might have initially been considered blessed in discovering a small reserve of oil. If used wisely, this small reserve could boost Timor-Leste's economy. Such a resource could also help non-oil sectors, primarily agriculture, as well as social services such as education and health. Timor-Leste's Prime Minister, Xanana Gusmao, summed up these expectations in a 2009 speech, declaring that if Timor-Leste's petroleum is wisely and transparently managed, "it will allow us, as a sovereign nation, to use our own resources to improve our infrastructure, invest in health and education and grow our economy so that we can build our country and provide a brighter future for our children."

These expectations are not far-fetched, given Timor-Leste's small population. Nevertheless, until now, these dreams are still far away. Timor-Leste is obviously following a familiar pattern in which oil does not lead to economic development. Rather than a blessing, it has increasingly become a curse.

The Petroleum Fund's successes

The government of Timor-Leste has tried to a certain extent to ensure that the country would not follow the same pattern as other developing countries. In 2005, Timor-Leste's legislative body unanimously voted to establish a Petroleum Fund Law.

This law, modeled on Norway's pension fund model, is the cornerstone of Timor-Leste's petroleum revenues management. Timor-Leste's petroleum fund was established on principles like intergenerational equity, transparency, and accountability, and it was designed to provide fiscal stability for the government. To guarantee inter-generational equity, the fund set guidelines for the government not to spend all of the money as it came in or when oil prices were high.

This law also established several measures for transparency through quarterly performance reports, annual reports, and audits. Finally, the law also defined the roles and responsibilities of public institutions like parliament, government, the central bank, and civil society organizations. Former prime minister Mari Alkatiri affirmed that "good management of petroleum revenues, sustained economic growth, alleviating of poverty, and a stable political future are essential parts of this law".

Parliament approved the law in 2005 in a unanimous vote. It was considered one of the best petroleum management laws in the world. Overall, the petroleum fund has provided a strong foundation for the fiscal stability of the Timor-Leste government. As of the end of June 2011, the petroleum fund balance had reached US$8.3 billion, $7.1 billion of it sitting in the US Federal Reserve Bank, and the rest invested in international equities and bonds from other governments.

The fund also helped stabilize the economy as a whole. As the International Monetary Fund observed in its 2010 report, "Driven by higher oil-financed public spending and a rebound in agriculture from the 2007 drought, non-oil growth averaged 11% during 2007-09. A recent estimate by the World Bank also shows a decline of poverty incidence from 50% in 2007 to 41% in 2009."

The fund's failures

Despite these successes, the petroleum fund has proven to be insufficient. Timor-Leste's current state of development possesses certain features of the resource curse, which even Nuno Rodriquez, a member of the Petroleum Fund Consultative Council acknowledged in an interview with the author.

First, there is no indication that Timor-Leste's dependence on petroleum revenues is lessening, at least for the near future. From 2005 to 2011, more than 90% of the government's revenue came from petroleum. On the other hand, non-oil revenues during this period were less than 10%, even dropping to 3% as recently as 2007. Every year since 2005, transfers from the petroleum fund accounted for more than 90% of the government's annual budget. This number will only increase as the government increases its annual budget.

Second, since Timor-Leste's independence, investments in productive sectors have been very low. Despite billions of dollars in foreign aid and the government's huge spending over the last several years, the real impact on the domestic economy has been very small. The country still imports everything.

According to Timor-Leste's Bank and Payment Authority's December 2010 report, Timor-Leste's trade deficit for goods and services has reached $881.2 million – an increase from $261.1 million in 2008 and $297.0 million in 2009. Timor-Leste's Ministry of Finance recently admitted that 70% of government spending flees the country.

Based on this data, the Bank and Payment Authority warned that "if policy makers fail to take decisive action to improve budget deficit and investing productively, by 2030 the current account deficit will continue increasing and increasing. The nation could be continuing transferring most of fund resources and its percentage of GDP annually to foreigners."

This data clearly indicates that the huge spending of petroleum revenue has not led to the development of a non-oil sector, not even to substitute for imported goods.

Third, unemployment, one of the biggest problem facing post-conflict countries, is a time bomb that can explode into conflict and civil unrest. The oil industry traditionally does not produce many jobs because it's a high-tech industry and mostly requires highly educated people. Very few Timorese have qualifications for that kind of work. The situation is even worse in Timor's case because upstream processing takes place in Australia, so Timor-Leste gets little out of the production, including few of the spin-off effects.

Further, since non-oil sectors remain weak, job opportunities for young people are few. With Timor-Leste's fertility rate the highest in the world, more people keep entering the job market. The agriculture sector, which employs most Timorese, is still underdeveloped. The Timorese even have to depend on imported rice from nearby countries like Vietnam.

Social disruption

The dark side of the economic growth connected to oil exports is social inequality. Most economic activity at present takes place in the capital Dili, whereas the rural regions are characterized by poor infrastructure. During the last four years, the government has invested more than $2 billion to improve rural infrastructure. But because of poor planning, poor execution, and lack of oversight and quality control, the gap between urban and rural Timorese remains.

Many people have left the agriculture sector to try to find jobs in Dili. Massive government spending benefits only a small elite in Dili, especially those that get contracts from the government. However, it has negative impacts on the majority of people who live outside of Dili. For those who do not share the benefits, or those who work in low-paid jobs, the increase in prices, especially for food, means that economic growth is not a benefit at all for the vast majority.

The case of Timor-Leste proves once again how petroleum dependency turns out to be a curse rather than a blessing. The petroleum fund model, in and of itself a good idea, cannot solve the complexities that post-conflict countries like Timor face.

"The petroleum fund is only one mechanism to help achieve good governance," says Jose Texeira, a member of the parliament from the opposition party. "But to avoid the resource curse also requires a political commitment from all parties."

[This article is a summary of Guteriano Neves' 2010 Summer Research Project, funded by the University of Hawaii at Manoa. The author is currently working as researcher at the Timor-Leste's Institute for Reconstruction and Development, La'o Hamutuk – www.laohamutuk.org.]

Potent mix brewing for Timorese

Asia Times - August 30, 2011

Simon Roughneen, Dili – Land, corruption and poverty are all on the table as Timor-Leste gets into political mode ahead of parliamentary and presidential elections scheduled for 2012, with one controversial figure already throwing his hat into the ring.

Convicted of arming gunmen during Timor-Leste's 2006 crisis, which threatened to destabilize the then four-year-old state, Rogerio Lobato told Asia Times Online that he will run for president, contesting a largely- ceremonial position now held by a fellow former Timorese exile activist, Jose Ramos-Horta.

It is not clear yet whether the incumbent – who commuted Lobato's sentence soon after the apparent assassination attempts against himself and Prime Minister Xanana Gusmao in 2008 – will compete again, but Lobato, a brother of former resistance hero Nicolau (after whom Dili's small international airport is named), is confident he can win.

"The charges against me were clearly political," he says, dismissing any notion they could count against him in the vote. "Others were accused of arming people too," he says, "how come they never came to trial?"

It is unclear yet whether Lobato will have party backing for his campaign, but he was part of the Fretilin administration that was eventually ousted in the 2007 elections, ceding control of the government to Xanana Gusmao's multiparty coalition despite winning more seats than any other party.

Asia Times Online witnessed Fretilin's internal party vote in Dili and in villages in Baucau district, close to the party's eastern stronghold, on August 20. More than 150,000 party members voted in direct elections for who will head up the party in the next elections. Incumbents Francisco "Lu-Olo" Guterres and former prime minister Mari Alkatiri were the sole candidates.

Party spokesman and member of parliament Jose Teixeira said that graft will be a key campaign issue for the party, which is confident it can win enough votes to govern independently after the next election. Asked what the election will center on, he said, "Corruption, collusion and nepotism is what is on everyone's lips; because massive budgets, massive claims have simply resulted in no improvement in people's lives."

After centuries of colonial rule by Portugal and a quarter-century of harsh Indonesian occupation, Timor-Leste voted to secede in 1999, and became formally independent in 2002. Despite a hefty United Nations presence since 1999, the country nearly lapsed into civil war in 2006, when one-tenth of the population was displaced as part of the police and army fought each other on the streets.

Timor-Leste, also known as East Timor, has earned about US$8 billion in oil and gas revenues since 2005, around the same amount it has received in overseas aid since 1999. Most of the energy earnings are being banked to ensure there are funds once the wells run dry, in an initiative that has won widespread international praise. That said, the resources are "a one generation window to build the country", according to a newly-leaked United States diplomatic cable from the embassy in Dili, dated August 21, 2009.

The current government has spent much of the budget increase allowed by the revenue on "recurrent expenditures such as wages and salaries", according to the cable, but has offered "one-time buyouts" to people made homeless by the 2006 violence and has increased spending on development projects.

Fretilin and opponents allege that these projects have only enriched the current government and their cronies, with Teixeira saying that the spending so far has "only made a few of the Dili political elite rich". According to the US cable, "petroleum revenue has boosted nominal statistics like gross national income, making Timor-Leste look more prosperous on paper, but that stimulative demand effect has yet to filter into the real domestic economy".

Resentment over slow development amid apparent graft could be exacerbated by a looming crisis over land rights and ownership. While Fretilin has yet to state its position on the country's proposed land law, the issue could be an election game-breaker should anyone run with a populist program.

After 24 years of brutal Indonesian occupation followed by post- independence upheavals, Portuguese-era and Indonesian-era land claims about who is entitled to stay where and why means there is more heat than light in Timor-Leste's land debate.

Some claims of ownership date to Indonesian times – an apparent contradiction given that Jakarta's occupation was deemed illegal under international law, while the Timor-Leste state is likely to claim much of the land that is not covered by the few Portuguese or Indonesian-era papers.

The code could – if applied to the letter – entitle the state to evict tens of thousands of Timorese in Dili, and more elsewhere. Many Timorese settled on available land after 1999's independence referendum, which sparked chaos as Indonesia's army and affiliated Timorese militias wreaked havoc as they withdrew.

While it is unclear if there is any direct link with a nearby Indonesian commercial project slated for the area, the details of which have not been made public, gang-related violence in Zumalai in the south of the country saw 100 houses torched.

According to one Timorese media personality who asked to remain anonymous, the PNTL – Timor-Leste's national police force – asked for assistance from the army to deal with the fallout from the attacks. While this might signal better relations after rivalries between the police and army played a part in the 2006 near-cataclysm, it raises questions about the strength and reliability of the police.

While the UN maintains a contingent of 1,280 foreign police in Timor-Leste, full control of policing was handed to the Timorese in a step-by-step process starting in 2009. In Zumalai, the arson is said to have been triggered by the stabbing of a gang member who was also a police officer. Many of the country's police are thought to be members of Timor-Leste's martial arts groups and street gangs, some of which also have links to political figures.

The land law has yet to be settled in parliament, but nonetheless the Timorese authorities are already pushing ahead with clearances to make way for projects, not only in rural areas but in the heart of the capital.

At a derelict backstreet building once occupied by some of the "petitioners" – the army cadres whose dismissal in 2006 helped trigger the street fighting that year – Asia Times Online spoke with Eufrajio Fernandes, part of a group of 175 families who were driven from their homes in Bairo Pite in Dili on January 20, to make way for a police housing project.

"They came at 4am, they did not give us any warning," he recalls. "They just came in the dark of night and kicked us out." The group was given $2,000 per household as compensation, money which came from the police rather than the Ministry for Land and Property.

"We cannot do much with this amount," he says, adding that he purchased land for $1,700 on the rock-strewn slopes of the mountains surrounding Dili. Whether he will be entitled to keep the plot is open to question, given the country's legal limbo over land, but he has already spent the remaining $300 on living costs since January.

His friend Alberto Soares Gama puts the group's anger in context. "In Zumalai there was burning and fighting, so the government acts to intervene. Here, we have been peaceful, but they ignore us," he says, referring to letters addressed to various government ministries. "They just fobbed us off with excuses."

[Simon Roughneen is a foreign correspondent. His website is www.simonroughneen.com.]

Countdown to real independence

New Zealand Herald - August 27, 2011

Klas Lundstrom – Blackouts remain a significant part of East Timor's capital, Dili, although Prime Minister Xanana Gusmao has promised the country's thirteen districts electricity by the end of the year – a promise which Gusmao is to realise with money from the country's oil fund, a fund increasingly tainted by corruption scandals and the falling US dollar.

In front of Dili's tiny harbour, headlights illuminate the night. This is the United Nations' industrial area, protected by warning signs, barbed wire and two bored security guards. They chain smoke cigarettes, talk and watch the night traffic pass by. What do the guards protect? Containers, generators, water tanks and tractors – a surplus of logistics that nobody uses in a society that lacks roads, clean water and electricity. Instead, this equipment has ended its days here, in the transit hall of the UN.

A fleet of white Toyota Land Cruiser's takes to the streets. The trademark for the UN staff represents a third of the country's vehicles. For many Timorese, 2012 is going to be the decisive year; a year of elections for president and parliament, and the final year of the UN force, UN Integrated Mission in Timor-Leste (Unmit), which will begin its withdrawal from East Timor after 12 years. A presence that began shortly before the bloody referendum of 1999, which ended in massacres and East Timor's final liberation from Indonesia.

East Timor was a de facto UN state between 1999 and 2002 until Gusmao – for many years a freedom hero in a prison cell in Jakarta – became the country's first elected President.

Now, 10 years down the road, the economy is in disarray as a result of the weak US dollar – East Timor's official currency. People ask themselves, the day UN staff leave, who will be able to afford an orange juice for US$4 ($4.80), let alone pay for a room at one of the capital's many luxury hotels?

The economic outlook, dependent on foreign investors, is from a Timorese perspective untenable. "It seems to be a culture that is difficult to change; the Timorese remains the servant and the foreigner its master, no matter if it's Portuguese, Indonesian or UN people who hold the political and economic power," an Australian media worker at Hotel Timor says.

Gyorgy Kakuk, spokesman for the UN mission, glances at the TV in the cafeteria inside the UN compound in Dili. The TV shows pictures of burning buildings in Afghanistan. "They have a real headache compared to us over here," he says. When the Hungarian joined the mission in 2009, the country seemed to be heading towards stability and peace. That is why the UN must leave East Timor, he says. "To do otherwise would be embarrassing. If the Government can't control the country without the assistance of the UN, it would be proof that things are not working at all here.

"The democratic institutions are in place thanks to the UN," he says. "To enter East Timor was a bit of a long shot, so in the end you can say that this mission has been a successful one. Many fear that violence will return when we pull out, but you have to understand that the UN can't stay here forever. It wouldn't be good, for anyone."

So, what will happen with the inflated economy the day the country's current upper class – the UN staff – pulls out? Kakuk admits that the UN has helped to shape an untenable economic situation, but, on the other hand, he adds, "you must not forget that this country is dependent on goods to be imported, which inflates the prices on everything".

According to UN studies, the economy will not be significantly affected by the UN withdrawal.

"In the end", says Kakuk, "it's up to the Government in this country to build industries, take care of the natural resources and increase the number of jobs for young people. Half the population is illiterate and among women that figure is even higher. So there are still things to do here, to say the least."

On another street, the dry heat is taking its toll on the people waiting outside the office of Angela Freitas, presidential candidate for the Worker's Party (Partido Trabalhista).

From here, Freitas, 43, is planning her campaign with a few associates. The country, she says, "is sinking like the Titanic". "If nothing is done today, if the same leadership will be given another five years to rule, East Timor will be looked upon as a failed state."

Freitas grew up with politics, her father founded the Worker's Party in 1974, the same year that the Portuguese pulled out of then Portuguese Timor after 500 years of colonial rule. When Indonesia invaded East Timor, nine days after Portugal's final withdrawal, Freitas had already sought refuge in the mountains, after her family had being chased there by the independent movement Fretilin. For many years, the Timorese united under the same banner against the Indonesian occupation, but lingering social, domestic and internal political conflicts would soon float to the surface and begin to mark splits on the walls.

The result can be seen today; East Timor is becoming more and more divided by poverty, gangs and criminal elements who control certain parts of the districts and urban suburbs, in turn backed and armed by different political forces. "These people, mostly young men without jobs, are the future of the country," says Freitas. "But they lack every interest in social issues or political ideas, they either make their living committing themselves to crime or jump on the first flight out of here."

Freitas' political programme is titled "Revolution Now"; her platform is nationwide and hopeful – but the political hierarchy she and her faithful are up against also have foreign support. Australia's Minister of Foreign Affairs Kevin Rudd recently met Gusmao and President Jose Ramos Horta in East Timor, a meeting that ended in closer ties between the Labor-led Government in Canberra and their counterparts in Dili. The meeting also resulted in an expanded aid package from Australia to East Timor, worth A$150 million dollars.

It's clear that the political stability stands or falls with the current leadership. Any domestic policy changes could quickly make foreign investors think twice, something that would have a devastating impact. Freitas is aware of all this, but is still keen to investigate any foreign contracts signed since 2002. "It's a promise to the Timorese voters. They deserve to know whether all these contracts and free rides given to foreign investments are clear of corruption and nepotism." The oil industry, she continues, is part of a "neo-colonial agenda that ultimately does not offer more than peanuts to the Timorese people."

One of East Timor's highest peaks is the mountain of Matebian; "the mountain of the dead". It was here, surrounded by the souls of their ancestors, that the Timorese resistance movement made its last stand before the war against the Indonesian occupation forces changed into clandestine guerilla warfare. The Indonesian air force, backed by Washington, finally brought the Fretilin guerilla to its knees with napalm and bombardments over Matebian.

Today, the results of the chemical warfare can be seen in the central highlands; the natural springs have been damaged, the infrastructure still resembles that of a war zone, and the harvest often goes to waste.

Apotino has lived on the slopes of Matebian all his life. He used to organise the transport of food, medicine and information up to the Fretilin forces further up on the slopes.

"They never caught us", the old man remembers, "they didn't know what path to use and they were also scared of fronting us face to face. The Indonesian forces knew that Matebian is a sacred land for us."

Nowadays, Apotino earns his living by cockfighting, the closest East Timor comes to a national sport. Apotino and the rest of Baguia's inhabitants live in a no man's land where the past and the present have become a single state of mind. Death is a natural thing here and it represents all that got lost in the quest for independence. Matebian finally got electricity in 2009, but it still takes four hours on the back of a truck to get there from the main road along the north coast.

Apotino calls the political elite "an opportunistic clique". "They make sure to have plenty for themselves, but for the rest of us – nothing." He falls silent. Is he going to vote in the coming election? Apotino remains silent and shrugs.

In the presidential palace, built by Chinese workers two years ago, Ramos Horta explains why East Timor has enjoyed economic growth for the fourth year in a row. "We have achieved amazing things since 2002. We still have a lot of problems, yes, but with wise leadership, even these issues will be resolved. The UN departure in 2012 is a necessary step in our continuing development."

The agriculture sector and the education system must be improved, the President adds. "The agriculture needs more political guidance, as well as the health sector needs better focus. But it has improved, what used to be a system of high fees for advisers and foreign people has gotten a lot better."

The question now, for the Timorese and East Timor's foreign partners, is whether Ramos Horta intends to run for a second term. "My head tells me that I shouldn't run, and colleagues abroad and in East Timor are encouraging me to run for re-election. I still haven't made up my mind. "

Ten years down the road, he predicts, East Timor will be a functioning democracy. "But this requires wise leadership."

[Klas Lundstrom is an investigative journalist and author from Sweden.]