Subject: TP: Timor-Leste Facing Regional Dilemma

Timor Post: 3 February 2003

Timor-Leste Facing Regional Dilemma: By Dionisio Babo Soares and Helder da Costa

The need to define Timor Leste's foreign policy in an increasingly globalised world has posed formidable challenges to the policy makers. Standing between two regional blocks ­ ASEAN and South Pacific Forum (SPF) ­ with seemingly close characteristics has exposed the world's newest nation to a duplication of regional alliance, as far as regional affiliations are concerned. This floating geo-political position forced the new government of Timor- Leste to adopt a neutral standing in its international policy outlook if it does not want to be ignored regionally. This policy outlook includes upholding both good neighbourhood policy (politica de boa vizinhança) and free and active involvement in intra-state relations.

Joining the regional blocs of ASEAN and SPF is both an economic and policy issue. ASEAN seems to be the most logic solution to develop international economic integration of Timor-Leste but the timing and the specific arrangements for a transitional period should be deeply discussed and dealt with the new partners.

While sharing close moral and emotional ties with the Pacific Nations due to its cultural background (Melanesian characteristics) and due to SPF's moral endorsement of Timor-Leste's struggle for freedom, Timor-Leste political leaders seemed to reluctantly endorsing any formal association with the pacific forum. The reason is rather non- economic, a determinant factor in the new country's future social and political stability. There would be obvious benefits for Timor-Leste in joining the Association of Southeast Asian Nations, ASEAN. Membership would give it access to an influential regional grouping, and help to broaden its Southeast Asian ties beyond Indonesia. It would connect it commercially to several strong, outward-looking economies, from which it could also learn much in the area of development policy and practice.

The appropriate question is perhaps how should Timor-Leste view ASEAN and vice versa? The likely answer is that Timor-Leste should view ASEAN positively. In time, Timor-Leste will undoubtedly become a member of ASEAN. Currently, Timor Leste has been granted an observer status in certain working group activities, thereby initially getting the learning benefits without having to bear burdens of full membership. In this way, Timor-Leste could learn a great deal about the benefits and difficulties of the growing regional economic arrangements. Joining ASEAN is like joining a club, which provides opportunities and challenges. Like all clubs, the ASEAN bestows benefits and obligations on its members. Evidently, the net benefits are overwhelmingly positive since no members have left. However, membership, costly both in terms of the membership fee and personnel resources, is beyond Timor-Leste's current resources. Nevertheless, membership should be a long-term goal. It can utilize observer status to prepare for membership in the medium-term. Such a timetable will economise on personnel resources at a time they will be heavily committed in other policy activities.

The views from ASEAN members toward Timor-Leste include: First, ASEAN endorses a policy where member states have the right to agree or reject any new membership based on non-interference policy. Myanmar has flatly rejected Timor-Leste's membership with ASEAN linking President Gusmao's good relationship with the Myanmar opposition movement, Aung San Su Kie in the past. While Cambodia Prime Minister Hun Sen has reluctantly endorsed membership with this regional block for unclear reasons. Second, ASEAN members would not agree if any prospective member states have a dual regional membership. Third, since ASEAN has on average a meeting daily on bilateral and multilateral issues (more or less 300 meetings on annual basis), would make impossible for Dili diplomats to attend all of them in view of the limited financial resources.

The preparatory work for a country's participation in ASEAN is normally carried out under four categories, (1) institutional and organisational arrangements; (2) structural adjustments and legal framework; (3) technical and specialised tasks; and (4) training activities. As a tiny country with extreme limited human resources, signing to innumerable international commitments and organisations remains a daunting task. The essence is to formulate capacity building for the Timor-Lesteese, recruiting senior bureaucrats through the establishment of training and development in various international organisations. However, sufficient financial resources need to be available for comparative studies in various regional organisations.

What is next?

The current hesitant approach to SPF, despite Dili diplomats and President Gusmao's visit to several Fiji in August 2002 is perhaps not a discouraging diplomacy approach in view of Timor-Leste's attempt to have a definitive place in the economically prosperous ASEAN. Nevertheless, Timor-Leste should not in any way disengage itself completely from the pacific archipelago. In fact, these small nations resemble in many ways the characteristic of Timor-Leste. Most of these are small nations and are economically small in scale and fall into the level of Least Developed Countries. Pacific island societies are subsistence and share the common touch that Timorese society are in many ways identified with. These countries have long experienced and are potential for Timor-Leste to deal with in terms of small-scale industries. For example on Fishing Industry on Petroleum and Mining (with PNG), development of marine exports such for Tuna and others.

Timor-Leste may well benefit from these countries in terms of education, tourism and the politics of small island nations vis-à- vis its bigger counterparts such as in ASEAN and other regional blocks. In general, joining regional blocks will bring advantages than otherwise. The important point here is that Timor Leste should contemplate ways that are potentially employable and economically viable instead of taking aggressive approach only to be sunk on its way to the end.

Selective Engagement Approach

Dili should consider apply for full membership in ASEAN and SPF through "Selective Engagement Approach (SEA)". The timing and scope of resources that Timor-Leste should devote to implementing foreign trade relations. It is in the interests of Timor-Leste to find better ways to extend effective foreign policy of the country. The magnitude of the tasks and the limited resources at the disposal of the Government suggest that Timor-Leste faces a difficult task. It faces not only a shortage of government revenues but also of appropriately skilled personnel. Hence, the Government will be dependent on international organisations and donor countries to provide both economic and technical assistance. Since Timor-Leste has little experience in both bilateral and multilateral relations coupled with the limited financial allocation, prudent approach to employ a SEA in engaging with ASEAN and in particular ASEAN Regional Forum (ARF) is a wise decision. Furthermore, as a fledging nation with little interest in the short-run, a selective engagement policy is the best option available while using the time to learn how the regional system works.

Participation in multilateral organisations

With this in mind, there will be a chance for Timor Leste to also participate in multilateral meetings joining the ACP (African, Caribbean and Pacific) group under the EU-ACP partnership, better known as the Cotonou Agreement and joining the WTO.

Given its past relations with Portugal, Timor-Leste is likely to wish to have close relations with the European Union, which in trade matters speaks for its Member States. One of the first steps the first Government took was to apply to be part of the Cotonou Agreement and it is currently an observer. While adherence to the Cotonou Agreement would therefore be natural, neither trade nor aid considerations argue strongly for immediate accession. As a Least Developed Country Timor-Leste will receive unilateral trade preferences from the EU and it is unclear whether Cotonou would provide better trade preferences. Likewise, Contonou is unlikely to provide any aid that is additional to what Timor-Leste currently receives from EU Member States in the foreseeable future. EU funds under the Cotonou Agreement are already determined until 2007 and it is unlikely that Timor-Leste would get additional funds before then. Timor-Leste should continue as an observer and aim to negotiate an Economic Partnership Agreement before the end of 2007.

Accession to WTO is not a question of if, but of when. Membership provides significant economic and commercial benefits, in particular by locking in sound economic policies but it also entails costs in terms of implementation, administration, representation and travel. These costs are often prohibitive for small countries and are likely to be beyond Timor-Leste's capacity for many years, barring significant external assistance. The accession process itself can take several years. Hence, membership in WTO, while an important objective for Timor-Leste, is unlikely to occur within the next 5-10 years. Nevertheless, Timor-Leste should have WTO accession as a clearly stated objective and adopt now as many of its rules and regulations as it can. Timor-Leste should therefore consider seeking observer status in the WTO now and start to build up its capacity to participate in the WTO, with a view to beginning the accession procedure within five years.

Similar to other clubs, the WTO offers rights and obligations as well opportunities and some challenges on member countries. So far more than 130 countries are WTO members and more than 30 others have applied to join. This implies that the net benefits are overwhelmingly positive. The general benefits that come from the freer trade those rules encourage as follows: In short, a country gradually amends its policies and institutions in readiness to abide by WTO rules and accept the obligations of membership. While these steps for Timor-Leste are still a long way off, the first step commonly taken is to request observer status so that national government officials can be exposed to WTO structure and mechanisms, a similar approach suggested in contemplating ASEAN membership.

Given the same difficulties experienced by several smaller island economies with little trade and basically represented only nominally, Timor-Leste is likely to face similar limitations. Being an LDC state, having lots of sympathetic friendly nations in WTO and having no strong protectionist interests defending bad policies yet, it is in the interest of Timor-Leste in the long term to apply for WTO membership in view of the potential benefits discussed earlier. Given an average of 5-10 years for a country's accession to WTO, it appears to be the cheapest and easiest way for Timor-Leste to join WTO and would provide lots of learning opportunities and technical assistance as policies are being formulated.

Dionisio B. Soares ( and Helder da Costa ( are researchers of Centro Nacional de Investigacao Cientifica (CNIC), UNTL Dili.

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