May 13, 2002

Dili faces future, hopeful of oil.

Eric Ellis, Dili

As East Timorese Chief Minister Mari Alkatiri and Australian Foreign Minister Alexander Downer were shaking hands in Canberra on Friday, Darwin architect Pat Kenny was putting the finishing touches on the renovation of a very important building in the East Timor capital, Dili.
The gracious Portuguese villa, officially opened next week by Downer when he and Prime Minister John Howard attend East Timor's independence celebrations on May 20, will be the headquarters of the East Timorese government authority that will administer oil revenues estimated to be worth as much as $8 billion to the impoverished nation.
On Dili's embassy row, the house is probably the capital's most desirable. There is a sweeping view of the harbour to the tanks of Indonesia's state oil company, Pertamina, which were it not for the brutality of Indonesia's soldiers from 1975-99 might have been the beneficiary of the Timor Gap's riches.
So important is the oil treaty to East Timor that the authority's house is expected to become Alkatiri's second office and, some say, his eventual home. Representatives from the two main developers, Shell and Phillips, are likely to rent rooms in the office, to be close to the decision-makers.
East Timor needs something to save its economy, and fast. A week before independence, its biggest industry is feeding and housing the 8000-strong force of United Nations internationals, many of whom will soon be packing up and taking their fat salaries with them.
This week, a group of international donors will meet in Dili to agree to a $US77 million ($141 million) aid budget for East Timor for the first year of independence.
It assumes Timor Sea revenues of about half that amount.
But as Foreign Minister Jose Ramos-Horta says, East Timor cannot survive on other people's money forever and that the best case for oil would be $US200 million a year in royalty revenues by 2004-5.
Beyond the aid economy, Ramos-Horta speaks of coffee and tourism as two growth industries, but even Abdul Allibhoy, country manager of the Portuguese group Delta Cafes, one of the world's largest coffee buyers, admits that only a small fraction of East Timor's coffee is of world-class quality. And with the UN dollars making Dili one of Asia's most expensive capitals, a $US40 a night room in a converted shipping container is not going to lure tourists away from cheaper Bali, apart from short-term curiosity seekers.
Ramos-Horta says many of the service business operating here, mostly from Darwin, are rapacious entities who will leave when the UN's US dollar bonanza dries up.
Personal feuds are also disrupt ing the economy. Royalties from the Timor Gap deal were originally to be shared 50-50 between Australia and East Timor.
American diplomat Peter Galbraith, son of the legendary economist John Kenneth Galbraith and negotiating on behalf of the East Timorese, won an 80-20 deal in favour of East Timor.
Then it became 90-10 and there were even moves by his office to exclude Australia from any royalty share.
Ramos-Horta described the tactics of Galbraith, no great friend of Alexander Downer, as causing unnecessary friction with the Australian side.
Ramos-Horta says that he does not expect any major obstacles to the treaty being signed by next Monday, May 20.
He likened the treaty to the difference between East Timor being a permanently failed state and a burden to the international community, or a relatively prosperous smaller nation like Costa Rica, in Central America with a small population and little industry.