Inter Press Service

June 17, 2008

East Timor: Outsourcing Sugar Cane

Analysis by Setyo Budi

DILI - The East Timor government's recent decision to grant vast lands to an Indonesian company to plant sugar cane has been heavily criticised by Timorese society, who are demanding that the government immediately revoke the contract with the foreign company.

"The process on how the agreement was made is not transparent. Public did not know beforehand," said Demetrio de Carvalho, director of Haburas, an East Timorese environmental NGO in an interview with IPS. " The monoculture system that will be applied for the plantation will threaten East Timor's biodiversity."

To some, the Memorandum of Understanding (MOU) -- that was signed on Jan. 15 by Mariano Assanami Sabino, East Timor's Minister of Agriculture and Fisheries and GT Leste Biotech, the Indonesian company that will set up and implement the project in East Timor -- has compromised East Timor's national interest over profit.

The MOU states: "The government will grant the company the exclusive concession of 100,000 hectares of unproductive land… to be utilised for sugar plantation, sugar plant and ethanol plant. The government shall accord the company a 50 years contract to land use and extendable to another 50 years… the project are strictly private ventures with no state participation of any sort whatsoever."

The critics are not only from civil society organisations, but also from within the coalition government and Fretilin, the main government opposition party. Mario Carascalao, the president of Democratic Socialist Party -- a political party that is part of the ruling coalition party, Majority Parliamentarian Alliance ­ made it known for the first time in a parliament session early June about the existence of the MOU.

In and interview with IPS he said, "the government cannot just give 100,000 hectares to someone without knowing the owners of the land… it will create instability. Some politicians believe that when they are in power they become owners of the country and can do whatever they want."

The sudden agreement, between East Timor's government and GT Leste Biotech raised peoples' eyebrows here. Nonetheless, it was strongly supported and recommended by Xanana Gusmao, East Timor's prime minister and Susilo Bambang Yudhoyono, the Indonesian president following their meeting during Gusmao's recent visit to Indonesia.

The reasons are politics and economics. For Indonesia it is in its interest to keep East Timor stable and secure, so trade between the two countries does not slow. This project may provide stability as it will employ over 10,000 workers from the two countries and economically will be of benefit to both of them.

"The product can also be used for Indonesia's [sugar] consumption, as Indonesia at presents needs about 4.8 million tonnes per year and East Timor will be able to fill such a need easier due to its geographic location," said Youanto Kenchana Jaya, representative of GT Leste Biotech in East Timor. Apart from producing sugar, the company also plans to produce ethanol.

For East Timor, however, apart from the prospects for profit the country may recoup -- which, according to the project's critics are rather minimal -- the environmental devastation due to sugar production potentially will be great. "Such an industry requires a lot of water, while East Timor is currently experiencing water insecurity… water may be polluted with farm chemical substance in the long run," Carvalho told IPS.

One of the reasons the East Timor government is allowing the company to utilise such a vast area of land for a sugar plantation is because of sugar cane's various uses. "The current sugar plantation is different from the one that was developed in the 80s, nowadays, sugar canes can be used for many things, including to produce methyl methanol that can be used as petrol," Sabino told IPS.

Due to the vast of area land that will be used for the plantation, if the project goes ahead, it will be going against the biodiversity convention that East Timor ratified in 2007. The treaty aims to "develop national strategies for the conservation and sustainable use of biological diversity." It is considered a key document to achieve sustainable development that is also recognised by East Timor's constitution in article 61: "The State should promote actions aimed at protecting the environment and safeguarding the sustainable development of the economy."

To the government, the project is important to show the people that the AMP ruling party can deliver ahead of possible early elections. "This is a way to produce employment… we need to create employment for people with low education. [The opposition] should not give false information that we sell our land foreigners," Sabino told IPS.

Over 10,000 Timorese will be employed in un-skilled work by the plantation. "They will be employed to look after irrigation, roads for the plantation, factory facility and other infrastructure... others will be employed as sugar cane cutters, and for ploughing. While the skilled and experienced ones will be brought in from Java Indonesia," Jaya told IPS.

"To the ruling party, this project is a way to show to the public that they can keep and deliver their promises made during the election campaigns in 2007," said Carvalho.

The ruling party also declared that this year would be a year of reform in many sectors within the government. Within the Ministry of Agriculture, reform is targeted at increasing rice production for internal consumption. "We have allocated 171,000 hectares of land for rice plantation and we are only able to manage 33,000 hectares… the sugar plantation is not to replace the rice field, each plantation has each own field," explained Sabino. East Timor harvested its first hybrid rice harvest on Jun. 10, in Tapo-Memo. The East Timor government bought more than one ton of hybrid rice seed from Indonesia and distributed it free of charge to 55 farmers in the area.

Nonetheless, the government's commitment to produce sugar and ethanol for export is considered as a blunder by its critics. "The agro fuel market is growing, but it is a market craze that is created almost like a bubble, and it may crash any time so it is a risk for a hundred thousand hectares of land," said Shalmali Guttal, researcher of Focus on the Global South, a Thailand- based NGO, in an interview with IPS during a recent visit to East Timor.

The other major sticking point that may become an obstacle for the project is the uncertainty of land titles in East Timor. This is one of the reasons why there is an absence of major private investment up to now in the country. East Timor ranks 168 out of 178 countries on ease of doing business, according to the latest Doing Business Survey.

For major projects, although the state can guarantee title of the land for project use, people who occupy the land need to be compensated. "This issue has become a polemic as the parliament has scrutinised the issue of land use. The government ministries need to have good coordination, before signing the lease contract for the company... the current document [MOU] is not enough," said Lucia Lobato, East Timor's Minister of Justice in an interview with IPS. The new land law is currently drafted and is waiting to be discussed in the parliament.

Although both ministries that will administer the project -- the Ministry of Agriculture and Fisheries and Ministry of Justice -- have claimed to have no knowledge of the areas where the project will be implemented, the company has surveyed and identified the location: Suai, Ainaro, Manufahi, Natarbora, and Lospalos.

"Within two years the project should have been implemented, because we have purchased heavy equipment that is ready to be delivered and funding from financial institutions is also ready to be used… otherwise we will invest elsewhere," Jaya told IPS.

The risk of environmental devastation and the impact on peoples' lives is real if the project is implemented without complying with established environmental procedures for ecologically sound businesses. "Haburas will sue the government and the company on behalf of the public based on disadvantages that they may get, if both parties do not heed our demand to have environmental assessment prior the project being implemented," Carvalho stressed.

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