Subject: Lodging a licence to print money, and a tax on Dili conscience

The Australian 14 Dec 99

Lodging a licence to print money, and a tax on Dili conscience

By DAVID NASON

THE Australian consortium behind the failed Dili Lodge hotel venture in East Timor hoped to reap an annual profit of nearly $7 million, while initially operating tax-free and paying wages of less than 60c an hour for local staff.

A business plan obtained by The Australian shows that Wayne Thomas, the millionaire Darwin car salesman, forecast a 250 per cent annual return on investment to the 18 investors who paid him $70,000 each for a 2.5 per cent share of the action.

But the venture collapsed last week when the UN Transitional Administration in East Timor ordered Mr Thomas, a 50 per cent stakeholder, to close the hotel by this Thursday. UNTAET maintains his lease with Manuel Carrascalao, the influential Timorese businessman, is illegal.

Mr Thomas, who has denied allegations of prostitution and money laundering at the 200-room hotel, was in Dili yesterday attempting to persuade UNTAET to rescind its order.

He insists his five-year lease with a five-year option is legal, and that UNTAET's actions have denied him due process and natural justice.

Despite that, the business plan drawn up by Mr Thomas raises serious moral questions about profits on offer to Australian business in the reconstruction of East Timor.

The plan emphasises cheap labour and the expectation profits will be free of tax "in the first year or so". It suggests ground-floor investors would be "well looked after" by Timorese political figures in the future, and that the Australian army "would no doubt provide a high degree of security to the venture". The plan further suggests that the views expressed by Shane Stone, the Liberal Party president and Northern Territory MP, played a key part in getting the venture under way and selling it to investors.

It states: "He (Mr Stone) basically said, 'A few people want to do this and other business projects but no one can find the land. If Manuel (Carrascalao) can give you land, you have 12 months' start'."

But Mr Stone yesterday denied he had pushed the project, saying he was angry his name had been used by Mr Thomas. He also denied any knowledge the hotel would operate in a tax-free environment.

"All I did was make a passive investment (of $70,000) through an investment company of which I am a director and shareholder," Mr Stone said.

"I did not see the business plan, I did not push the project along and I am not involved in the operations."

According to the business plan, capital costs of $2.7 million would be fully recovered within six months, while the projected net profit of $130,000 a week did not include "substantial" further profits from bar sales and meals at the hotel.

Wages for Timorese housemaids, gardeners and kitchen hands would be $40 a week.

This works out at less than 60 cents an hour for the estimated six-day, 72-hour week.

Mr Thomas was to draw a $100,000 annual management fee, but only if investors received a minimum 20 per cent return on their investment.

Mr Thomas could not be reached for comment yesterday but documents provided by his office said the hotel was employing 109 staff, of whom 98 were Timorese.

The Timorese were being provided with free meals and their wages were above the standard rate for Dili.


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