Subject: Timor advisory body calls for budget amendments

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Timor advisory body calls for budget amendments

Updated Tue Jul 22, 2008 10:07am AEST

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In recent weeks eyebrows have been raised over the rectification which will take money from the country's petroleum fund to more-than double the current 2008 state budget, with critics calling the extra spending irresponsible.

Now the government has hit a new snag with the Petroleum Fund advisory body agreeing that the budget is unclear, and should not be passed in it's current form.

Presenter: Stephanie March

Speakers:Alfredo Pires, East Timor State Secretary for Natural Resources; Tomas Freitas, Vice Coordinator for Petroleum Fund Consultative Council; Manuel Tilman, MP and chair of the parliamentary committee for Economy, Finance and Anti-corruption

MARCH: East Timor's government led by Xanana Gusmao has come under-fire in recent weeks over allegations of nepotistic one-source tendering, corruption, and poor financial management. Criticism has come not only from the opposition but also from civil society, which led to heated student protests against the government buying brand new 4WDs for the 65 members of parliament. The government's now on a mission to prove to the people it's capable of responsibly handling the hundreds of millions of dollars drawn from petroleum revenue to fuel the state budget.

Alfredo Pires is the secretary of state for natural resources.

PIRES: This government has established a Timor-Leste transparency model where we are trying to share as much information as possible to the people of Timor-Leste in regards to what we are doing with the oil and how the money is being spent.

MARCH: His ministry has devised an a-peeling way to get that information to the people, called 'The banana show'. In 'The banana show' brochure each Minister is evaluated on their ability to spend the 2007 transitional budget, with a rating system that uses fruit.. instead of figures. The best performing ministers are awarded a durian, those with less capacity to execute the budget get a pineapple or coconut, and those who were unable to spent even 25 percent of their allocation - receive a banana.

PIRES: There is a high percentage of illiteracy so words don't mean a thing, so pictures mean a thing. So if they see a picture on a minister and a fruit right next to it, it becomes quite effective. And the information we put in it comes from the finance department and the finance department I think they have the systems with a lot of international assistance to insure that those are the figures that actually demonstrate what happened to the budget execution .

MARCH: And the obvious question that has to be asked, is Xanana a banana?

PIRES: I have to tell you not because he is my PM in terms of strategic management, there would be very difficult for anyone to match him, I think these things come from the war itself developing strategies and skills about using what resources you have to attain it.

MARCH: In the 'the banana show' the Prime Minister, was awarded a durian because he was able to spend 84 percent of his allocation. But the idea that he is a good economic manager is not shared by everyone. Parliment is currently debating the mid year rectification budget review, that would see the total yearly budget more than double to 774 million US dollars.

The opposition has said the budget is extravagant, but now, the Petroleum Fund Consultative Council - a body enshrined in the Petroleum Fund legislation itself - is advising parliament not to approve it. They are concerned that the rectification budget is asking for $290 million dollars more than the most recent calculation of the oil fund's estimated sustainable income. Tomas Freitas, the councils vice coordinator, says the petroleum fund law requires government to explain clearly the long term benefits of the investments funded by the oil money.

FREITAS: So regarding to the document that parliament provide to us, that budget document, [it's] not clear explanation of that 290.7 million so that is why we say to government we didn't recommend to approve the special withdrawal of the petroleum fund into the state budget.

MARCH: Xanana Gusmao has defended the budget saying it is a necessary step to spur economic development and to deliver tangible services. Critics say the rectification budget is designed only to top up the existing budget to take into account unforeseen essential expenses. The document before parliament also includes items like $300,000 for medals for international troops, and half a million dollars on opening new embassies overseas. 240 million dollars of it is contained in one line item - the Economic Stabilization Fund.

State Secretary for Natural Resources Alfredo Pires.

PIRES: It's a fund, 240 million aside and there will be rules and regulations on how we can spend and what we can spend but basically it is to anticipate future increases in all items, specifically if price of oil is going to stay between 150 and 200 then the price of everything is going to go up.

MARCH: He says it is designed to subsidize the price of rice, oil and construction materials, but Tomas Freitas is concerned.

FREITAS: In the stabilization economic fund for us, its not a clear explanation. First, we underline its not clear that budget which ministry is responsible - is it the council of ministers? Or prime minister, or minister of finance? It not clear, it just put seperately under goods and services.

MARCH: He says the spirit of the petroleum fund is to create long term prosperity for the people of East Timor, and that using it to buy rice from other countries is not the way to do that.

FRETIAS: Is that money 240 going to be used to by all of the rice from thailand or whatever? All that money is going out, they never explain this money is going to be used to buy local product rice. If they explain ok this special amount will buy the local rice maybe we can agree over that because the money going to stay with the local farmer, but no.

MARCH: The Petroleum Fund Consultative Council took it's recommendation to the parliamentary committee for Economy, Finance and Anti-corruption. Kota party MP and chair of that committee Manuel Tilman says based on the recommendation they too will be asking parliament not to pass the rectification budget without some serious amendments. He says in it's current state the budget review leaves the door wide open to corruption and the Economic Stabilization Fund will increase inflation to unsustainable levels.

TILMAN: This is something like communist [system]? that you control the essential factors - construction and rice - because food in East Timor this is the main material of business but the government control that. 

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