ISSN #1088-8136

Vol. 8, No. 2
Winter  2002-2003

The State of International Aid to East Timor

by Karen Orenstein

To fill an expected government budget shortfall of between $84 and $91 million for fiscal years 2003-2005, donor countries pledged $82 million at a May donors conference in East Timor. Most of these funds will constitute a Transition Support Program (TSP) supervised by the World Bank to provide budget support. The U.S. and most other donor countries have opted to channel funds for such support through a World Bank administered trust fund. Portugal is the only donor country to give directly to East Timor’s budget, pledging to cover 10% of its shortfall. The U.S. pledged $4 million for the first year, money that comes out of the $25 million already appropriated by Congress for 2002, and is expected to contribute additional funding for subsequent years. The World Bank itself is giving a $5 million grant.

East Timor has allocated 37% of its 2003 budget for health and education, a percentage that is scheduled to rise to 48% by 2005 and is considered one of the world’s most positive for the poor. Shortly before the donors conference, East Timor’s government released its National Development Plan (NDP), a 319-page English-language document expected to become the basis of a Poverty Reduction Strategy Paper (PRSP). PRSPs are widely viewed as structural adjustment programs masquerading as poverty reduction. A Country Assistance Strategy (CAS), which the watchdog group Bank Information Center refers to as “the World Bank’s ‘Master Plan’ for each borrowing country,” is expected by next spring.

The government of East Timor joined the World Bank, the International Monetary Fund (IMF), and the Asian Development Bank (ADB) in July. These and other International financial institutions (IFI) have pushed a strong free market agenda in East Timor, which is clearly reflected in the NDP and the Transition Support Program. Privatization of national assets is also advocated. In a document explaining the TSP, the World Bank portrays privatization prospects in communication and power sectors. The ADB advocates promotion and support for private sector involvement in water supply and sanitation services in a separate report.

East Timorese officials attended the annual meetings of the IMF and World Bank in Washington in late September. Just blocks away, Aderito Soares, a leading Timorese human rights activist and former member of East Timor’s first parliament, was attending a different sort of meeting. Aderito gave one of the keynote speeches at the closing plenary of the anti-corporate globalization teach-in, “Global Struggles Against the IMF and World Bank.” In early October, East Timorese NGOs organized a seminar to discuss East Timor joining the IFIs. At the seminar, attended by financial institution representatives, members of civil society questioned the IFIs’ activities in East Timor to date and their intentions for the future.

As the poorest country in Asia and a small nation coming out of a brutal occupation preceded by centuries of colonialism, East Timor is in a very vulnerable position with limited negotiating power. With donor money, and by extension the government’s budget, effectively under World Bank management, close scrutiny is critical to ensure that the agenda of the Timorese people, and not that of IFIs and wealthy countries, is advanced in these first years of independence. With colleagues in East Timor and throughout the world, ETAN will continue to keep a watchful eye on the development and implementation of IFI and donor policy. For more information, see the excellent La’o Hamutuk Bulletin

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