Subject: The forgotten
In all the woe and strife, here's something worth smiling about
October 14, 2008 12:00am
EAST Timor, one of the world's poorest nations, has outsmarted the economic giants in the global financial meltdown.
As investment banks collapsed and share markets were hammered, the fledgling nation's wealth - about $US3 billion-plus ($A4.45 billion), mostly from oil and gas - was tucked safely away in US Treasury bonds.
Although the oil price has slumped, the country is still earning more than $A100 million a month in oil revenue and its sovereign wealth fund, dubbed the Petroleum Fund, is on track to hit $US4 billion by the end of 2008.
Based on a Norwegian model, the fund was set up to save money for the future and provide a steady income flow to the government.
Finance Minister Emilia Pires told BusinessDaily yesterday that East Timor, like other developing nations, was not immune from the financial turmoil.
But she said the government's conservative investment approach, and a healthy dose of luck, had so far helped insulate it.
"We have managed to escape the financial crisis simply because we were not in equities," she said.
"The bad luck of others has not touched us."
Ms Pires was speaking from New York, where she has attended <http://www.imf.org/>World Bank and International Monetary Fund talks and also caught up with a personal friend, billionaire George Soros.
Mr Soros has strongly criticised US and European officials for taking too long to address the financial crisis and blamed a lack of regulation for the mess.
Ms Pires reflected on how East Timor's government was criticised by the IMF earlier this year for intervening to combat rising food and fuel prices.
The government dipped into the Petroleum Fund to lift the year's budget by more than 120 per cent to $US788 million, allocating $US240 million to an economic stabilisation fund to limit the price rises.
The tiny nation has effectively done first what governments in the US and Europe are now scrambling to do with their multi-billion dollar economic rescue packages.
"In a developing country like ours the government has to intervene because you don't have any other solution so we are kind of used to this sort of thing," said Ms Pires.
"I think it is a shock to developed countries because they have better systems and now they are going through this phase of distress.
"Maybe it's hitting them harder because psychologically they weren't prepared for it."
Before the financial crisis took hold, East Timor had planned to diversify the Petroleum Fund wealth from simply US bonds to include other investments.
Ms Pires said yesterday the government was still working on ways to improve its financial returns and ensure "all its eggs are not in one basket".
Despite East Timor's growing oil wealth, most of its people still live on less than $US1 a day.
As the global financial wrangles continue the country's biggest challenge is to develop vital infrastructure such as roads, electricity and transport services.
Ms Pires said the government was intent on helping East Timor's people by investing in industries such as agriculture.
"All they want is a chance to get on with their own lives and as the government we have to create the opportunities for them."