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• More than half of Timor-Leste’s people live in More than half of Timor-Leste’s people live in poverty, and the number is growing.poverty, and the number is growing.
• 80% of the people live in rural areas, largely 80% of the people live in rural areas, largely by subsistence farming.by subsistence farming.
• About 1,500 Timorese children under 5 years About 1,500 Timorese children under 5 years old die from preventable conditions every year old die from preventable conditions every year … about 20 times the number of people who … about 20 times the number of people who die from physical violence.die from physical violence.
• More children die from diarrhea than malaria, More children die from diarrhea than malaria, and our malaria rate is among the highest in and our malaria rate is among the highest in the world. Sanitation and malnutrition are the world. Sanitation and malnutrition are endemic.endemic.
• More than half of Timor-Leste’s people live in More than half of Timor-Leste’s people live in poverty, and the number is growing.poverty, and the number is growing.
• 80% of the people live in rural areas, largely 80% of the people live in rural areas, largely by subsistence farming.by subsistence farming.
• About 1,500 Timorese children under 5 years About 1,500 Timorese children under 5 years old die from preventable conditions every year old die from preventable conditions every year … about 20 times the number of people who … about 20 times the number of people who die from physical violence.die from physical violence.
• More children die from diarrhea than malaria, More children die from diarrhea than malaria, and our malaria rate is among the highest in and our malaria rate is among the highest in the world. Sanitation and malnutrition are the world. Sanitation and malnutrition are endemic.endemic.
By 2022, 280,000 more By 2022, 280,000 more
babies will have been babies will have been
born, and the only born, and the only
producing oil and gas producing oil and gas
fields will be used up.fields will be used up.
How will they How will they
survive?survive?
By 2022, 280,000 more By 2022, 280,000 more
babies will have been babies will have been
born, and the only born, and the only
producing oil and gas producing oil and gas
fields will be used up.fields will be used up.
How will they How will they
survive?survive?
The state gets money from The state gets money from
exporting oil and gas and spends exporting oil and gas and spends
it on various activities.it on various activities.
The budget plan and execution The budget plan and execution
reflects the leaders’ wishes and reflects the leaders’ wishes and
capacity. capacity.
South Sudan (and Equatorial Guinea?) are the only countries South Sudan (and Equatorial Guinea?) are the only countries which depend more on oil and gas exports than Timor-Leste. which depend more on oil and gas exports than Timor-Leste.
• Projected state revenues in 2014:……….. $2,380 million$2,213 million (93%) will be from oil (incl. $770m investment return)$ 166 million ( 7%) will be from non-petroleum sources
• 2014 State Budget:…………………………… $1,500 million $903 million (60%) $903 million (60%) will be taken from the Petroleum Fund in 2014.will be taken from the Petroleum Fund in 2014.$430 million (29%) more $430 million (29%) more is from the Petrol. Fund in the past and future.is from the Petrol. Fund in the past and future.
• Non-oil GDP in 2011:..………………… $1,046 million Petroleum GDP in 2011:…………….… $3,463 million (81%)
• State activities, paid for with oil money, are about half of our “non-oil” activities, paid for with oil money, are about half of our “non-oil” economy, because some of this money circulates in the local economy.economy, because some of this money circulates in the local economy.
• Non-oil balance of trade (2013):Non-oil balance of trade (2013): $843m imports, $16m exports $843m imports, $16m exports (98% coffee).(98% coffee).
• Petroleum “income” goes to the State, not the people.Petroleum “income” goes to the State, not the people.
Legal Basis of the State BudgetLegal Basis of the State BudgetSection 145Section 145
(State Budget) (State Budget)
1.1.The State Budget shall be The State Budget shall be prepared by the Government and prepared by the Government and approved by the National approved by the National Parliament. Parliament.
2.2.The Budget law shall provide, The Budget law shall provide, based on efficiency and based on efficiency and effectiveness, a breakdown of the effectiveness, a breakdown of the revenues and expenditures of the revenues and expenditures of the State, as well as preclude the State, as well as preclude the existence of secret appropriations existence of secret appropriations and funds. and funds.
3.3.The execution of the Budget shall The execution of the Budget shall be monitored by the High be monitored by the High Administrative, Tax and Audit Court Administrative, Tax and Audit Court and by the National Parliament.and by the National Parliament.
1. RDTL Constitution
2. Budget and Financial Management Law
3. Petroleum Fund Law
4. Annual Budget law
5. Infrastructure Fund Decree-Law
6. National Development Agency (ADN) Decree-Law
7. Human Capital Development Fund Decree-Law
•Acting as if the oil money will last foreverActing as if the oil money will last foreverBayu-Undan and Kitan will be dry by 2020.Bayu-Undan and Kitan will be dry by 2020.
•Borrowing today, to repay tomorrowBorrowing today, to repay tomorrowTL will borrow $491 million in the next six years, often for TL will borrow $491 million in the next six years, often for projects with little chance of return.projects with little chance of return.
•Lack of realistic long-term planningLack of realistic long-term planningThe Strategic Development Plan 2011-2030 is but a The Strategic Development Plan 2011-2030 is but a dream.dream.
•Seeing money as the solution to every Seeing money as the solution to every problemproblemIt’s easier to buy a scholarship than to build a university.It’s easier to buy a scholarship than to build a university.
•Spending without thinkingSpending without thinkingRecurrent expenditures go up more than 20% each year; Recurrent expenditures go up more than 20% each year; projects often produce little result or return.projects often produce little result or return.
• Import dependencyImport dependencyIn 2011, TL’s non-oil balance of payments deficit was $1.5 billion.In 2011, TL’s non-oil balance of payments deficit was $1.5 billion.
• Inflation from little local productive capacityInflation from little local productive capacity Our productive economy cannot absorb the cash in circulation Our productive economy cannot absorb the cash in circulation
• Ignoring non-oil development and revenuesIgnoring non-oil development and revenues
•Benefits go mostly to the urban elite.Benefits go mostly to the urban elite.Most people won’t use highways, airports and oil facilities … Most people won’t use highways, airports and oil facilities … but will share the costs of paying for them.but will share the costs of paying for them.
•Petroleum “captures” decision-making. Petroleum “captures” decision-making. Agriculture, tourism, small industries, etc. don’t get a “fair Agriculture, tourism, small industries, etc. don’t get a “fair go.”go.”
Total revenue: $1,500 million, of which 88% is Total revenue: $1,500 million, of which 88% is from from past, present and future oil and gas income.past, present and future oil and gas income.
Timor-Leste has already received 60% of the Timor-Leste has already received 60% of the revenues from Bayu-Undan and Kitan, and they could revenues from Bayu-Undan and Kitan, and they could end in seven years.end in seven years.
From Ministry of Finance’s proposed 2014 State Budget
This table, from the 2014 budget proposal, This table, from the 2014 budget proposal,
shows how quickly our future revenues will shows how quickly our future revenues will
decline, as the ESI falls every year.decline, as the ESI falls every year.
2020
2222
2323
Timor-Leste has almost no industry Timor-Leste has almost no industry
and a tiny private sector. and a tiny private sector.
• Human security is health care, food, Human security is health care, food,
education, employment, housing, etc.education, employment, housing, etc.
• 20 times as many Timorese children 20 times as many Timorese children
under five die from avoidable under five die from avoidable
conditions as people are killed by conditions as people are killed by
violence.violence.
• These children will not be helped by These children will not be helped by
police, soldiers or judges, but many police, soldiers or judges, but many
donors prioritize the “security sector,” donors prioritize the “security sector,”
seeing everything through a conflict seeing everything through a conflict
lens.lens.
• We must diversify our economy and We must diversify our economy and
strengthen our people and workers to strengthen our people and workers to
prepare for the day our oil runs out prepare for the day our oil runs out
and we can no longer pay for imports.and we can no longer pay for imports.
Importa Sistema Elétrika Nasionál
Merchandise importsNon-oil exportsPower plant imports“Imports” of U.S. dollar notes
The graph shows legal goods trade only. About 89% of The graph shows legal goods trade only. About 89% of donor spending and more than 70% of state spending leaves donor spending and more than 70% of state spending leaves the country.the country.
More than 70% of Dili’s population are among the wealthiest More than 70% of Dili’s population are among the wealthiest 20% of Timorese, while only 2% are below the poverty line. 20% of Timorese, while only 2% are below the poverty line.
More than half of families outside Dili live in poverty.More than half of families outside Dili live in poverty.
•Population Population is increasing 2.4% per year, doubling in less is increasing 2.4% per year, doubling in less than 29 years (the post-war “baby boom” than 29 years (the post-war “baby boom” will become parents).will become parents).
•Inflation Inflation Consumer prices increased more than 11% Consumer prices increased more than 11% during 2012, but inflation slowed to 4% in during 2012, but inflation slowed to 4% in 2013. 2013.
People’s needs and desires will People’s needs and desires will increase increase
as the nation develops.as the nation develops.
Timor-Leste is struggling to find jobs for 15,000 Timor-Leste is struggling to find jobs for 15,000 people who will enter the work force in 2014. people who will enter the work force in 2014.
By 2024, it will almost 30,000 each year, and the By 2024, it will almost 30,000 each year, and the oil will be gone. Today’s youth will have children oil will be gone. Today’s youth will have children of their own.of their own.
Current plans for Current plans for
development will not development will not
sustainably improve people’s sustainably improve people’s
lives. lives.
• In 2010, TL began the South Coast Petroleum In 2010, TL began the South Coast Petroleum Corridor.Corridor.
• During 2011-2013, TL spent $35 millionDuring 2011-2013, TL spent $35 million
• Total project costs could exceed $2 billion (much Total project costs could exceed $2 billion (much more if Timor-Leste pays for the refinery, pipeline more if Timor-Leste pays for the refinery, pipeline or LNG plant).or LNG plant).• The new The new budget budget allocates allocates $46m in $46m in 2014 and 2014 and $320m in $320m in 2015-2018, 2015-2018, but leaves but leaves a lot out. a lot out.
Tasi Mane Project total cost Tasi Mane Project total cost projections fluctuate wildlyprojections fluctuate wildly
• It makes TL more dependent on the oil and gas sector.It makes TL more dependent on the oil and gas sector.
• Dubious concepts and planning; it is unlikely to Dubious concepts and planning; it is unlikely to provide a reasonable return on investment.provide a reasonable return on investment.
• It neglects sustainable development (agriculture, It neglects sustainable development (agriculture, tourism, small industries etc.), exemplifying the tourism, small industries etc.), exemplifying the obsession with oil.obsession with oil.
• Nearly all the money spent will go to foreign Nearly all the money spent will go to foreign companies, providing hardly any local jobs or companies, providing hardly any local jobs or subcontracts.subcontracts.
• It will create social conflict, take up land, displace It will create social conflict, take up land, displace people, worsen health and degrade and endanger the people, worsen health and degrade and endanger the environment. environment.
• Cost projections leave out most expenditures, Cost projections leave out most expenditures, including nearly all of the highway, LNG plant and including nearly all of the highway, LNG plant and refinery.refinery.
• What if Sunrise gas doesn’t come to Timor-Leste?What if Sunrise gas doesn’t come to Timor-Leste?
The Government has made many unrealistic promises The Government has made many unrealistic promises to local communities about profit-sharing, jobs and to local communities about profit-sharing, jobs and other benefits.other benefits.
• IFC is encouraging IFC is encouraging Timor-Leste to Timor-Leste to build a port and build a port and airport far beyond airport far beyond realistic traffic realistic traffic expectations.expectations.
• How will the How will the country pay for a country pay for a $6 billion annual $6 billion annual trade deficit after trade deficit after the oil is gone?the oil is gone?
0
100,000
200,000
300,000
400,000
500,000
600,000
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
TE
U p
.a.
Base full import Base full export Base empty container High Scenario Low Scenario
Traffic forecast for Tibar Port
PPPPPPTibar Port Tibar Port
• Done through Public-Private Done through Public-Private PartnershipPartnership
• IFC (World Bank Group) IFC (World Bank Group) oversees project designoversees project design
• IFC expects that Timor-Leste IFC expects that Timor-Leste will increase imports will increase imports indefinitelyindefinitely
• Estimated capital investment Estimated capital investment $300-$400 million$300-$400 million
Tibar Port in the Infrastructure Fund, 2013 State BudgetSpent in
20122013 2014 2015 2016 2017
After 2017
0.7 3.8 15 25 30 50 more
Infrastructure Fund, 2014 State Budget
0.7 2.5 7.5 20.4 109.5 9.9 more
IFC’s scenario for importsIFC’s scenario for imports
4747
Dili Airport Dili Airport
•Another PPP managed by IFCAnother PPP managed by IFC
•Expected that 300,000 Timorese Expected that 300,000 Timorese people will fly every yearpeople will fly every year
4949
From the Infrastructure Fund in 2013
Spent
in 2012
2013 2014 2015 2016 2017After 2017
Dili Airport 0 3 15 20 20 20 liu
From the Infrastructure Fund in 2014
Dili Airport (RDTL)
0 1 5.6 53.6 68.9 30.6 100
Dili Airport (borrowed)
2 15.5 25 40 14+
$2.5 million more is allocated in 2014 for runway rehabilitation.
5050
• Laws since 2009 paved the way for foreign loans. Laws since 2009 paved the way for foreign loans.
• In 2012, Timor-Leste signed contracts to borrow In 2012, Timor-Leste signed contracts to borrow $107 million from Japan and the ADB. $107 million from Japan and the ADB.
• In November 2013, it signed for $90 million more In November 2013, it signed for $90 million more from the ADB and World Bank.from the ADB and World Bank.
• During 2014-2018, it hopes to borrow half a During 2014-2018, it hopes to borrow half a billion dollars. See the proposed infrastructure billion dollars. See the proposed infrastructure budget:budget:
2014$31m
2015$117m
2016$158m
2017$140m
2018$37m
• Implementing the SDP will require billions Implementing the SDP will require billions of dollars in loans, probably at commercial of dollars in loans, probably at commercial rates.rates.
• Even at concessional rates, repaying a loan Even at concessional rates, repaying a loan will permanently reduce money in the will permanently reduce money in the Petroleum Fund. The yen loan makes us Petroleum Fund. The yen loan makes us hostage to a strong dollar.hostage to a strong dollar.
• TL’s oil and gas are small and non-TL’s oil and gas are small and non-renewable, and future oil prices are renewable, and future oil prices are unpredictable.unpredictable.
• TL will have to make loan repayments TL will have to make loan repayments before spending money on people’s needs before spending money on people’s needs or developing other sectors.or developing other sectors.
• Our children and grandchildren will inherit Our children and grandchildren will inherit the debt after the oil wells have run dry.the debt after the oil wells have run dry.
You will find more and updated information atYou will find more and updated information at
•La’o Hamutuk’s website La’o Hamutuk’s website http://www.laohamutuk.org
•La’o Hamutuk’s blogLa’o Hamutuk’s bloghttp://laohamutuk.blogspot.com/
•Reference 16GB USB available from our office.Reference 16GB USB available from our office.
•If you want to use our graphics, just ask.If you want to use our graphics, just ask.
Timor-Leste Institute for Development Monitoring and Analysis
Rua Martires do Patria, Bebora, Dili, Timor-Leste
Mailing address: P.O. Box 340, Dili, Timor-Leste
Tel. +670 77234330 (mob.) +670 3321040 (landline) Email: [email protected]
• The project is stalled because Timor-Leste and the The project is stalled because Timor-Leste and the companies do not agree on how it should be developed.companies do not agree on how it should be developed.
• Woodside and its partners Shell, ConocoPhillips and Woodside and its partners Shell, ConocoPhillips and Osaka Gas believe a floating LNG plant in the sea is the Osaka Gas believe a floating LNG plant in the sea is the most profitable.most profitable.
• Timor-Leste wants a pipeline from Sunrise to Beaçu, to Timor-Leste wants a pipeline from Sunrise to Beaçu, to get more tax revenues and anchor the Tasi Mane project.get more tax revenues and anchor the Tasi Mane project.
• Under contracts and treaties, the companies can choose Under contracts and treaties, the companies can choose the path, but both governments need to approve it.the path, but both governments need to approve it.• TL can withdraw from TL can withdraw from most of CMATS any most of CMATS any time before a time before a development plan is development plan is approved. approved.
• Because of Australian Because of Australian spying, TL is trying to spying, TL is trying to invalidate CMATS. invalidate CMATS.
Timor-Leste
Australia
Known oil and gas reserves per citizen
797 barrels1,178
barrels
How long they will last at 2012 production rates
14 years 58 years
• Australian companies began exploring Sunrise in the early Australian companies began exploring Sunrise in the early 1970s, after Australia and Indonesia divided our maritime 1970s, after Australia and Indonesia divided our maritime resources without involving Portugal. In 1989, they closed the resources without involving Portugal. In 1989, they closed the “Timor Gap” to share illegally occupied resources in the Joint “Timor Gap” to share illegally occupied resources in the Joint Development Area.Development Area.• The 2006 CMATS treaty The 2006 CMATS treaty bans maritime bans maritime boundaries discussion boundaries discussion for 50 years. It divides for 50 years. It divides Sunrise upstream Sunrise upstream revenues 50-50.revenues 50-50.
• Australia put its greed Australia put its greed for oil before respect for oil before respect for its sovereign for its sovereign neighbors or neighbors or international law.international law.
• Based on UNCLOS , TL Based on UNCLOS , TL owns everything north owns everything north of the median line.of the median line.
1989: Foreign ministers Gareth Evans and Ali Alatas toast the signing of the Timor Gap Treaty while flying over the Timor Sea.
This graph includes known fields which would belong 100% to Timor-Leste under the international law median line principle: Bayu-Undan, Elang-Kakatua, Greater Sunrise, Kitan, Laminaria-Corallina and Buffalo.
