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Groups worldwide urge debt-free Timor-Leste not to borrow - Pending loans could endanger Timor's future
September 8, 2011
The groups argue that "Rather than repeat the mistakes of other developing countries that have struggled with debt during recent decades, Timor-Leste should learn from their experiences, which often inflicted great hardships on their people."
The letter warns that, despite Timor-Leste's current petroleum wealth: "When Timor-Leste's oil and gas run out in less than 15 years, and debts still must be repaid, Timor-Leste's children and grandchildren will suffer the consequences."
The letter was initiated by Timor-Leste's Movimento Kontra Deve (Movement Against Debt, facilitated by La'o Hamutuk) and the US-based East Timor and Indonesia Action Network (ETAN).
The full text of the statement in Tetum and English with a complete list of signers can be found at http://www.etan.org/news/2011/08debt.htm and http://www.laohamutuk.org/econ/debt/2011/11ETANMKDStmt5Sep2011.htm.
The statement was endorsed by 117 organizations based in 28 countries. International networks with long experience in opposing onerous debt on developing countries are among the signers, including: Focus on the Global South, Jubilee South – Asia Pacific Movement on Debt and Development, Third World Network and CADTM International (Committee for the Cancellation of Third World Debt).
Twenty groups in Timor-Leste signed the statement, including the Timor-Leste Institute for Development Monitoring and Analysis (La'o Hamutuk), NGO Forum, Student Front, Community Leaders Forum, Haburas Foundation and ETADEP. Signing organizations from Timor-Leste's southeast Asian neighbors include WALHI – Friends of the Earth Indonesia, Freedom from Debt Coalition – Philippines, International NGO Forum on Indonesian Development (INFID) and EARTH (Ecological Alert and Recovery Thailand).
Other signers include sustainable development advocates and groups that have long supported the people of Timor-Leste, such as Jubilee USA, the International Platform of Jurists for East Timor, Oil Change International (USA), Aidwatch (Australia), Friends of the Earth US, Bank Information Center (USA), Tapol (U.K.), CAFOD (U.K.), Japan East Timor Coalition, and the Free East Timor Foundation (VOT, Utrecht, the Netherlands).
Income from oil and gas provides 95% of Timor-Leste's state revenue, making the country the most petroleum-export dependent in the world. Although Timor-Leste has not yet borrowed funds from other countries or international financial institutions, the government has passed several laws to enable borrowing, including the 2009 Budget and Financial Management Law, as well as revisions to the Petroleum Fund Law and the new Public Debt Law both passed just two weeks ago. In early August, the Asia Development Bank posted information on its website about a proposed $8.15 million loan to Timor-Leste to upgrade the national road network.
The Movimento Kontra Deve is a coalition of civil society organizations in Timor-Leste opposed to the country taking out loans. ETAN (www.etan.org) is a 20-year old US-based group working in solidarity with the people of Timor-Leste.
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Timor-Leste should remain debt-free
We, the undersigned Timor-Leste and international organizations, urge the government of Timor-Leste to keep the nation debt-free and refrain from borrowing money from international lenders.
We do not take this position to hold Timor-Leste back, but to protect its future generations. Rather than repeat the mistakes of other developing countries that have struggled with debt during recent decades, Timor-Leste should learn from their experiences, which often inflicted great hardships on their people. This is especially important because of Timor-Leste's high dependence on exporting non-renewable oil and gas wealth, a resource which will run out soon.
More than thirty years ago, lenders made loans to developing countries, creating unsustainable debt and causing the "debt crises" of the 1980s and 1990s. Today, creditors continue to drain scarce resources that could have been spent on essential services like health care, education, water and sanitation. International financial institutions – like the IMF and the World Bank – forced countries which owed them money to implement so-called austerity measures, demanding cuts in public services in order to repay debt. This has included the privatization of state services like water and electricity. The poorest and most vulnerable members of society have been forced to pay more for essential services, and salaries of public servants have been lowered. Even when loans are made at concessional interest rates, borrowing countries are often legally obligated to prioritize debt payments above their people's needs.
Some argue that revenue from Timor-Leste's oil and gas wealth can provide a cushion against which to borrow. History proves such thinking is wrong. The more oil a country produces and the greater its dependence on petroleum exports, the more debt that country is likely to accumulate - and Timor-Leste today is the most petroleum-export-dependent country in the world, with oil and gas providing 95% of state revenues. Oil prices and interest rates are very volatile and beyond Timor-Leste's control, leaving it especially at risk, as petroleum revenues will decline and interest rates may rise while loans are still being paid back. When Timor-Leste's oil and gas run out in less than 15 years, and debts still must be repaid, Timor-Leste's children and grandchildren will suffer the consequences.
In most developing countries with oil resources, worsening economic and development conditions with little long term benefit are the result, including increased conflict, impoverishment, and corruption. Timor-Leste should avoid such a tragedy by learning from other's experiences, not repeating them.
The Democratic Republic of Timor-Leste began life in 2002 without owing money to anyone. For the sake of an equitable, prosperous, and environmentally sound future for today's and tomorrow's children Timor-Leste should remain debt-free. We urge Timor-Leste's leaders and international institutions to use other ways to finance the country's much-needed development.
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