Growing concern at Gusmão’s direction for Timor-Leste

Economy, Government, International relations, Politics

Growing concern at Gusmão’s direction for Timor-Leste

Aug 25, 2023

Australia’s leading financial media platform, the Australian Financial Review, raised the red flag about the future of Timor-Leste this month, with International Editor Professor James Curran’s article, Timor-Leste on brink of failure.

Curran sensibly said that Chinese influence in Timor-Leste may be a concern in Canberra, but the big problem is that the small nation of 1.5 million people will run out of funds by 2030 unless new petroleum revenues can come from the Greater Sunrise gas fields, or from an unknown ‘Plan B’. He raised serious doubts that the Timorese political “elites” could solve this problem and so it would become a problem for Australia, Indonesia and for the Association of South East Asian Nations (ASEAN).

In particular, Curran attributes to “experts” the view that the current Prime Minister Xanana Gusmão’s leadership style is “crazy-brave, arbitrary”.

The picture is dire, and a little more complicated than Curran describes, because not all Timorese leaders are “impervious to the plight of the people”, and because there is a ‘Plan B’, but one that Prime Minister Gusmão has spurned.

At the start of 2023, the Petroleum Fund held US$16.338 billion and 2023 State Budget will draw down US$1.346 billion. So by year’s end the Fund may be at US$14.992 billion (A$23.25 billion).

According to the Timor-Leste State Budget, under the current spending trajectory, with no significant future income from the Bayu-Undan field, there is a risk that Timor-Leste will hit a fiscal cliff in 2034 at which point around US$1.6 billion worth of spending cuts may be necessary. This would result in a large shock to GDP, likely resulting in large rises in unemployment and large falls in incomes, the provision of public services and the living standards of most citizens. If Gusmão somehow gets the Greater Sunrise Joint Venture moving, and its associated onshore petroleum industry, he will be spending US$26 billion. The Petroleum would be fully committed plus borrowings, and the State Budget would be in trouble much earlier.

And as Curran explained, it is now much less likely that Greater Sunrise will attract the finance it needs.

On May 3, 2023, just prior to the May 21 Legislative Elections, the Council of Ministers approved the 2023-2028 Readjusted Strategic Development Plan, and recommended it to the next Parliament and government. This new plan adjusted the 2011 Strategic Development Plan for the impacts of climate change and the pandemic, and elaborated the diversified economic development goals required if the petroleum development pathway is no longer viable. But in July Gusmão announced that his government would revert to the 2011 plan. So, there is a ‘Plan B’, it is just unlikely to be considered.

Already the new government has caused consternation by embarking on the early termination of short-term public service contracts held by identified members of FRETILIN, with 1,500 being dismissed from just two of 12 departments in July. The total could run to 15,000.

As well, on July 27, 2023, Gusmão has said that former Finance Minister Emelia Pires should be welcomed back to the Ministry from Portugal, where she has been evading a seven-year jail sentence dating from 2016 for awarding a A$1million contract to her husband’s company. Lucia Lobato, a former Justice Minister jailed for five years in January 2013 for corruption and abuse of power while in office, has been welcomed back in public life to reform the justice sector.

In a calculated rebuff to President Jose Ramos Horta, Prime Minister Gusmão declared on August 7, 2023, that Timor-Leste should reconsider its application to join ASEAN if the regional body could not end the military coup in Myanmar. Horta has made ASEAN membership his own ‘Plan B’ for a brighter economic future.

Gusmão’s electoral alliance with Horta since early 2022 was a significant factor in his big election win against FRETILIN in May.

Australia’s Special Representative for the development of the Greater Sunrise gas fields, former Victorian Premier Steve Bracks, has got his work cut out for him.