The starting premise of this chapter is that East Timor has enough similarities with war-torn economies elsewhere for it to be useful to consider the lessons from the experience of those other countries. In particular, we would like to draw on international experience to help answer a fundamental question: what policies are needed, and in what order, to move a war-torn economy from devastation to a path of sustainable economic recovery?

East Timor qualifies as a recently war-torn economy, on the basis of the upheavals of 1999. After the consultation vote of 30 August 1999 in which 79.5 per cent of voters opted for independence, the Indonesian army (TNI) and the local militias it supported rampaged through East Timor. Of the total population of just over 900,000, an estimated 250,000 people fled, or were forcibly removed, to West Timor as refugees. A further 250,000 were internally displaced, as they left their homes for the relative security of the hills and forests (UNHCR 2000: 2). The number of deaths due to the conflict was relatively modest by the standards of most wars – about 1,500 dead, or roughly 0.2 per cent of the population – but the killings occurred in a very short interval and so were particularly traumatic.

An Australian-led multinational force, Interfet, intervened in late September 1999 to restore peace and security. In October the government of Indonesia revoked its 1978 decree annexing East Timor, and the United Nations Transitional Administration in East Timor (UNTAET) was established on 25 October to administer the transition to independence. In February 2000 the peacekeeping operation was turned over to UN troops, and in July 2000 a power-sharing arrangement began with the appointment of a joint cabinet comprising five East Timorese and four international staff. Elections will be held on 30 August 2001 to choose an assembly that will write a constitution, with formal independence expected in 2002.

HUMAN RESOURCES DEVELOPMENT

There are obvious connections between economic growth and human development: ‘On the one hand, economic growth provides the resources to permit sustained improvements in human development. On the other, improvements in the quality of the labour force are an important contributor to economic growth’ (Ranis et al. 2000: 197). The connections between human development and economic growth are not, however, automatic, and their strength depends on a large range of factors – including, on the government side, the appropriateness of the economic policy setting and the proportion of GNP devoted to priority social expenditure and, on the household side, the amount of income households allocate to human development at a given income level. Happily, there are important synergies in human resources development, and many points of mutual reinforcement between governmental and private actions: the personal benefits derived from human resources development programs lead to individual actions that promote further such development (Jones 1992).

THE SITUATION IN EAST TIMOR BEFORE AND AFTER 1999

Educational development in East Timor was very restricted under Portuguese rule. During the period of Indonesian rule, primary schools had been opened in almost every village by about 1985, and the proportion of young people spending time in school increased greatly. However, the increase was not enough to enable East Timor to catch up with the other provinces of Indonesia. Moreover, educational enrolment ratios remained lower for the children of East Timorese than for those of people moving to the province as government officials, with the army or as traders. Illiteracy rates remained extremely high, particularly at ages over 40 and among women. In 1990, in households whose head was born in East Timor, illiteracy fell below 50 per cent only in the 15-24-year age group (Jones 2000: 48).

A table from the 1995 Intercensal Survey (Table 16.1) shows educational attainment by age and sex in 1995 among persons living in households whose head had been born in East Timor.

Coffee is a critical crop for East Timor, for three reasons: it is East Timor's most important export (at least until gas production begins in the Timor Gap); it is the most important source of cash income for a significant portion of East Timor's impoverished rural population; and coffee processing is an important source of seasonal employment. This chapter outlines the role of coffee in the East Timorese economy; the main characteristics of the world coffee market and their implications for East Timor; features of coffee production in East Timor; and key short-term and longer-term issues that will need to be addressed by government and industry participants in order to obtain the maximum benefits the coffee industry can provide to the people of East Timor.

THE ROLE OF COFFEE IN EAST TIMOR'S ECONOMY

Coffee brings good news and bad news for East Timor in 2001. The good news is that the trees are holding a bumper crop, with an estimated 10,000 metric tons of green beans waiting to be picked, processed and exported. The bad news is that international coffee prices are at a historic low: the New York ‘C’ contract price (to which most East Timor coffee prices are linked) is expected to average only $0.60/lb compared with last year's already low $1.00/lb. In calculating the value of the crop (Table 8.1), we assume that 30 per cent of this year's crop is wet-processed and will sell for an average premium of 12 cents on the market, and that 70 per cent of the crop is dry-processed and will sell at a 25 cent discount. We also assume that the crop is sold at an estimated New York ‘C’ price of $0.60 per pound and that 100 per cent of the crop is exported. Under these assumptions, the international value of coffee exports from East Timor could surpass $10 million. However, not all of this value will be added in East Timor because the New York ‘C’ price is a cost, insurance and freight (c.i.f.) price, delivered into licensed warehouses in North America and Europe.

Trade and commercial policy is one of the keys to a prosperous and viable East Timor. Along with macroeconomic and social policies, and institutional development, no set of policy issues is more important. ‘Openness’, variously defined, consistently emerges as a significant and positive factor in the large ‘determinants of growth’ literature (see, for example, Barro and Sala-i-Martin 1995). Two lessons from more than 50 years of development experience stand out: open economies grow more quickly than closed ones; and high levels of savings and investment – the engine of development – will occur only if economic agents, from rural cottage enterprises to multinational corporations, can operate in a secure, stable and conducive commercial environment.

These propositions provide the unifying themes of this chapter. We develop here the bare bones of an approach to trade and commercial policy which focuses in turn on the specifics of trade policy, trade and industry policy, measures to promote an efficient private sector, and policy issues and options for the state enterprise sector. These are of course large and complex issues, and one paper cannot discuss all of them in detail.

TRADE POLICY

Some General Considerations

Three lessons from economic development should inform commercial policy in East Timor:

1. • outward-oriented economies outperform inward-looking ones;

2. • in small economies the costs of trade intervention are large and quickly evident; and

3. • by dint of geography, it is sometimes observed that ‘God made archipelagic Southeast Asia for free trade’.

East Timor has very little choice other than to maintain an open trade regime, where the lower boundary is obviously free trade, and the upper limit is Indonesia's (now very open) trade regime. Protecting one sector entails taxing others, and it is not obvious that any particular sector deserves protection over any other. Assuming they (deservedly) receive a high priority, rural and agricultural activities can be promoted through direct productivity-enhancing investments in such areas as roads, irrigation and agricultural extension.

This volume offers a forward-looking perspective on the economic development of East Timor. It traces the country's ‘initial conditions’, assesses and adapts the lessons of international experience, and contains detailed discussions and recommendations across a broad range of subjects. Very few countries are commencing the long march towards economic development in such an ill-prepared state. Centuries of Portuguese colonial occupation and neglect were followed by almost one-quarter of a century of troubled and sometimes brutal Indonesian rule, though with quite rapid economic development for a period. Then, in the wake of the August 1999 vote for independence, there was massive destruction on the part of the militias and departing Indonesian military. The country reverted temporarily to UN administration, with an impossibly ambitious timetable for independence.

The country's starting point could hardly be more difficult.

1. • It is an extremely poor country, with a per capita income of about S300.1 This is broadly equivalent to the income of the poorest states of mainland Southeast Asia, and that of Portugal's former African colonies, but well below that of most small Pacific Island and Caribbean nations.

2. • About 70 per cent of its building stock was substantially or partially destroyed in September-October 1999. In that tragic year, East Timor's GDP was estimated to have declined by about one-third.

3. • There was massive population resettlement and dislocation in that year. At the time of writing (May 2001), about 10 per cent of the country's pre-1999 population still resides abroad, mostly in squalid refugee camps across the border in West Timor.

4. • Much of the commercial expertise fled in 1999 and is unlikely to return.

5. • The country lacks high-level bureaucratic capacity. During the Indonesian period, senior echelons were dominated by non-Timorese; currently, UN officials occupy most senior positions.

6. • The country doesn't have a constitution or a legal system; land ownership disputes are rife.[…]

East Timor opened a stormy new chapter in its history on 30 August 1999 when its people voted overwhelmingly for independence from Indonesia. More than 98 per cent of registered voters defied intimidation to cast their ballots in an orderly and peaceful manner. The people of East Timor won the world's admiration for their commitment to democracy. The discipline, patience and dignity displayed on that day will be a hallmark of East Timor as it moves towards recovery and independence. Implementation of the results of the ballot should have been an occasion for celebration. Instead, the people of East Timor were forced to watch the birth of their country with tears.

The reconstruction that will accompany the journey towards independence in East Timor, while arduous and painful, will also provide a genuine opportunity to establish appropriate infrastructure, institutions and economic policies at the outset. That will facilitate the rebuilding of this small and devastated land into a viable, self-sufficient, democratic state for the 21st century.

In order to establish a sound macroeconomic framework for East Timor, more hard choices will need to be made. These pose formidable challenges for future policy-makers in this country. The Transitional Cabinet has endorsed policies establishing a framework for macroeconomic stability. This needs to be supplemented by appropriate structural and social policies to increase investment and employment in both the private and the public sector. Growth based on attracting private investment, both national and foreign, requires public policies and investment to provide better infrastructure, well-established property rights, effective governance and the rule of law.

Parallel with this, a future independent East Timor must begin to show its commitment to sustainability by building a sound fiscal framework underpinned by a stable, credible currency. Initiatives to establish a national currency in the future will include efforts to ensure it has strong financial backing and the credibility necessary to be welcomed by international financial markets.

The new nation of East Timor will certainly wish to improve the living standards of the population, and will no doubt give top priority to the goal of poverty alleviation. The purpose of this chapter is to suggest which policies may be most effective in achieving this goal. The first part of the chapter examines the legacy of the years 1975–99, when East Timor was a province of Indonesia. A considerable body of statistical data is available for this period, and an examination of these data is essential if we wish to understand the nature of the challenges facing the new government. The second part of the chapter looks at policy options, drawing both on the lessons of the Indonesian period and on the wider literature on poverty alleviation that has proliferated in recent years.

THE INDONESIAN LEGACY

Trends in Poverty and Inequality

During the 1990s, data from the Household Income and Expenditure module of the National Socio-economic Survey (Susenas) carried out by the Indonesian Central Statistics Agency (BPS) were used to produce estimates of the head-count measure of poverty by province in Indonesia. (The headcount measure is the proportion of the total population whose monthly expenditure falls below a stipulated poverty line.) The estimates for 1993 and 1996 for East Timor, and for four other provinces in eastern Indonesia, are shown in Table 15.1. According to the estimates published in 1998, the headcount measure of poverty was higher in East Timor than in any other province in both 1993 and 1996. The revised estimates for 1996 published in 1999 (which were based on a revised poverty line estimate) indicate that a higher proportion of the population fell below the poverty line in both Irian Jaya and Maluku. It is not possible here to give a full account of the debate surrounding the official poverty estimates in Indonesia, or to give a comprehensive explanation of the changes in the estimation of the poverty line that were introduced in 1999.

This chapter aims to crystallize the transport and power sector policy issues that challenge the Transitional Administration in East Timor and that will face the new East Timorese indigenous administration immediately after its inauguration. These issues have loomed large as the backdrop during the emergency rehabilitation phase of 1999–2000. While many of the problems facing the transport and power sectors are a legacy from the previous Indonesian administration, they are in no way unique to East Timor. However, the new administration must not delay its response: a series of crucial policy decisions is needed, and these decisions will shape the economic potential of the whole country.

The restoration of East Timor's infrastructure has to date concentrated on the physical provision of road access, landing of goods at the ports, airport safety, and power and water supply at the main population centres. Chief among concerns about sector management is the limited capacity of the new government to finance the recurrent costs of maintenance and operation of the reinstalled facilities. As a result, the affordability of service levels is a subject of debate.

TRANSPORT SECTOR POLICY ISSUES

Introduction

Transport is central to development – to poverty reduction and economic growth. Transport is an intermediary service: while it alone cannot reduce poverty, it serves a penetrating role in the economic development process, and complements delivery of crucial services such as health clinics, schools and extension services. Inherently, transport provides access to markets and employment, and contributes to security and the strengthening of nationhood by allowing the administration to reach its constituent populations. It helps to reduce poverty by increasing economic efficiency, leading to lower costs and prices, and providing access to employment opportunities. Transport enhances agricultural production and improves rural commerce. It promotes rural-urban communications, thereby reducing urbanization, and improves the quality and quantity of health and educational services. The effects of transport policy are thus pervasive, affecting economic performance and incomes, income distribution, prices, poverty, human settlements and the environment.

The idea of this book was first explored in a two-day symposium organized at the Institute of Southeast Asia Studies, Singapore, in 1994 with financial support from the Konrad Adenauer Foundation. The purpose of the symposium — entitled “Problematizing Culture: Media, Identity, and the State in Southeast Asia” — was to examine the nature of media representation and politics of identity in the various nation-states in the region. However, by the end of the symposium, it became clear that two key issues had emerged as the central preoccupations of the participants: the predominant role of the state in the cultural and discursive realms, and the deployment of post-modern and post-structuralist theorizing in analysing local processes. I took the idea — and the inspirations — with me when I moved to the University of Sydney in October 1996, and commissioned additional contributions from among my new colleagues. On the whole, I have tried to maintain the critical vision as formulated in the symposium. The 1997 financial meltdown in Southeast Asia forced most of us to do another round of revisions to reflect recent developments.

The strength and insight of the book owe much to the contributors, and their goodwill and humour in graciously accepting my editorial suggestions and demands. I would also like to thank Chua Beng Huat, Ariel Heryanto, Michael Van Langenbach, and Sharrad Kutton for their stimulating input; and David Birch and Brian Shoesmith, who first planted in my mind the seed of a Southeast Asian Cultural Studies project. In Sydney, Mark Berger, Ien Ang, Helen Grace, and Richard Basham have been invaluable “fellow travellers”. I am most grateful to Ashley Carruthers and Phillip Mar for their editorial assistance and companionship, and Akaash, Neena, and Simryn for their patience. This project was funded by the Institute of Southeast Asian Studies, Singapore, where I was a fellow from 1993 to 1996.

In May of 1992, demonstrators succeeded in overthrowing the military government of General Suchinda Kraprayun and restoring democracy. One academic described these events in his newspaper column almost exultantly, “It has never happened that a mob anywhere has been so full of automobiles, mobile phones, hand-held radios, and workers of the ‘white collar’ type” (Sayamrat sapda wichan, 14 June 1992, p. 12). Early in the demonstrations, the protestors were dubbed by the press the “automobile mob”, and the “mobile telephone mob”, a depiction retained in academic works and retrospectives on the May uprisings.

Representations thus prominently feature automobiles, mobile phones, the “middle class”, and democracy, tying these concepts together in a way that has important implications for viewing their role in Thai society and the democratic state. Yet these representations, constructed by middle-class academics and journalists, are not an objective or accurate portrayal of the events. In order to illuminate the discrepancies in this middle-class constructed representation, and to locate the aspects that have disappeared, a closer look at representations of the middle class, the poor, the rich, and democracy is necessary.

Picturing ambiguity

Picture, if you will, a museum as a study in discursive ambiguity. Picture, then, an unsettled quality suffusing the Negros Museum, established in 1994 within a handsome 1930s provincial capitol built in the spirit of a design by the famous Chicago architect Daniel Burnham for American colonial government buildings in the Philippines. One wonders if it is the building itself — resting, as it does, in neo-classical splendour and in close proximity to an open air and usually quiet wet fish/meat/ vegetable market across the street, near the busy pier of this capital city of Bacolod, in the environs of the remarkable sugar-cane plantations of this province of Negros Occidental — that communicates this vague sense of incongruity.

Ambivalence, too: but this perhaps issues from seeing this stately capitol together with a museum within it that does not intone stately narratives. Five years after it opened, the museum still conveys an indeterminacy that is doubtless amplified by the very determined qualities of its architectural setting. For it may indeed be observed that any act of representation here — for instance, sounding voices stilled by the sugar industry — inevitably sounds half-hearted, perhaps annoyingly so, within the elegant ballroom of this building, emblem of the politics that guarded the immense wealth created in this province by mono-cropping. Framed by perfect acanthus-leaf capitals atop columns edifying the sixty-foothigh ceiling — uplifting this space the way sugar-cane is said to have done for this province — the museum's critique-driven curatorial design can only appear effete or irresolute.