Subject: Questions over East Timor's budget review

Questions over East Timor's budget review

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Questions are being asked about a proposal to massively increase government spending in East Timor. A mid-year review has recommended that parliament approve a doubling of the state budget for this year. Dili says it needs to set up an Economic Stabilisation Fund to manage public anger over rising food and fuel prices. Critics say the extra spending is irresponsible.

Presenter: Karon Snowdon Speaker: Charlie Scheiner, researcher with La'o Hamutuk

SNOWDON: The East Timor government says it's got two main reasons for doubling last December's budget...oil prices and oil prices.

Firstly, higher global prices for oil means East Timor is getting paid more for its resources.

By the end of this year its three-billion dollar Petroleum Fund is expected to have 200 million dollars more than previously forecast.

Secondly, on the other side of the same coin, living costs are going up for its people.

In a mid-year adjustment, the government is proposing to more than double the budget to 774 million dollars, most of it to come from the Petroleum Fund.

Keeping on eye on this is La'o Hamutuk, the East Timor Institute for Development Monitoring and Analysis.

La'o Hamutuk Researcher Charlie Scheiner accuses the government of a lack of transparency.

He says a lot of the extra money is going into questionable projects, including more than one million dollars for government cars.

SCHEINER: We have two concerns about this. Firstly many of the new projects are major commitments over many years that have never been discussed publicly, that haven't gone through any kind of environmental assessment. The other concern is that the road that they're going down is a classic recipe for the resource curse that afflicts many countries that depend on petroleum revenues.

SNOWDON: East Timor's oil reserves are estimated to last perhaps 15 years.

The Petroleum Fund set up by the previous government was designed to fund the country for much longer through careful investment management and to avoid the resource curse of squandered wealth.

Charlie Scheiner says few of the funding proposals will contribute to lasting development.

SCHEINER: Very little of it is for education, for health, for infrastructure, for things that actually will in the long run make people's lives better. And it's why Timor Leste in 2005 setup a Petroleum Fund. It's to smooth out the flow of incomes. When you look at in the first six months of this year, from January until now, even though they were authorised to spend 294 million dollars from the Petroleum Fund they haven't withdrawn a penny. So it's a totally crazy thing to think that they can spend 686 million in the next six months.

SNOWDON: Can you give me any examples of some projects that have been nominated that you think are questionable? Where is this money going to be spent?

SCHEINER: Well the biggest single project that's included in this budget is for a pair of heavy oil electric generating plants. This is a 390 million dollar project. Heavy oil is a technology that most of the world is abandoning now because it's so difficult to manage and because it's so environmentally destructive.

SNOWDON: And part of the budget increase includes a 240 million dollar economic stabilisation fund. Now I've heard talk of possible demonstrations being planned in East Timor because people are finding that price rises of food and fuel are causing quite a lot of distress. So again doesn't this make sense for the government to spend their money in this way and ease for itself some problems, but certainly to ease the pressure on people?

SCHEINER: In Timor Leste, 80 per cent of the population lives by subsistence agriculture and grows their own food, and so they're not affected by the price of food, and they don't have cars and they don't have motorcycles. There is a middle class, an urban middle class in Dili that is affected by that. But more importantly than that if they're going to spend 240 million dollars they should be spending it to provide longer term food security to this country to support agriculture to replace imported products with locally produced products. But what we've seen is the main agricultural support projects that this government is promoting is to support agrofuels products; sugarcane and jatropha that they want to export and bring in more money.

SNOWDON: Last year, East Timor was unable to spend its more modest budget. It simply doesn't have the human resources to realise some of the planned projects.

The Finance Minister Emelia Pires was today in the Parliament arguing her case for the revised budget and was unavaliable for an interview which Radio Australia hopes will be possible later this week.

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