Timor-Leste shaping up for legislative electionsJan 31, 2023
The Timor-Leste March 2022 Presidential elections gave a resounding win in the second round to Nobel Laureate Jose Ramos Horta, and this provided leverage for Xanana Gusmão in his efforts to wrest back the executive power he apologetically relinquished in February 2015.
But Gusmão and his National Congress for Timorese Reconstruction (CNRT) must still win a majority in the Legislative Elections due between May and August this year. Normally elections are every five years.
To do that, Gusmão has to build a new coalition to register for the election, because CNRT alone has never been able to attract more votes than the Revolutionary Front for Independent Timor-Leste (FRETILIN), and the party with the most votes is invited first to form a government.
This constitutional provision wasn’t followed by President Ramos Horta in 2007, when FRETILIN won the most votes. President Lu’Olo did follow the rule in 2017 when FRETILIN again won the most votes, and was assured by Gusmão and other party leaders of stability for the minority government that was formed. However, late in 2017, CNRT and its allies rejected the government program, and as political tension morphed into a very serious institutional crisis, the President dissolved the parliament and early Legislative elections were held in 2018.
For that election, Gusmão created a coalition – the Alliance for Change for Progress (AMP) – to contest the early Legislative elections against FRETILIN and won it. President Lu Olo applied good governance principles and didn’t swear in all of Gusmão’s chosen ministers, asking Prime Minister Taur Matan Ruak to reconsider some of the proposed names. Political tension grew within the AMP itself, and it collapsed when CNRT voted against their own Budget in January 2020. Gusmão expected all the FRETILIN MPs to vote against the Budget as well, thus masking the CNRT move, but most of the FRETILIN MPs were absent and CNRT was clearly exposed. The Prime Minister sent his resignation letter to the President. The next step came when CNRT moved a censure motion to vote out the Prime Minister but Kmanek Haburas Unidade Nasional Timor Oan (KHUNTO), with five seats, refused to join in, and this move failed.
Worse for Gusmão, the President Lu’Olo urged the party leaders and parliamentarian groups to find a way for the parliament to continue to operate.
Because the COVID-19 pandemic arrived in March 2020, there was a consensus that the government needed to respond quickly and effectively, and the Prime Minister withdrew his resignation letter and FRETILIN offered to stabilise the government.
The new government from June 2020 was based on Prime Minister Taur Matan Ruak’s People’s Liberation party (8 seats), KHUNTO (5 seats) and FRETILIN (23 seats), giving it 36 seats in the 65-seat parliament.
The major issue in the 2022 Presidential elections was Gusmão’s plan for the Timorese government itself to develop the Greater Sunrise gas fields and to process the gas on the south coast. The on-shore processing project is called Tasi Mane, calculated to cost US$ 18 billion.
Incoming President Ramos Horta had promised Gusmão that he would dissolve the parliament and call new elections. However, this did not happen because the new government majority alliance stuck together, and because any unilateral dissolution of the parliament by the President is unconstitutional unless there is a clear and very serious institutional crisis, such as the parliament twice rejecting the government’s program.
Instead President Ramos Horta focussed on achieving Timor-Leste’s accession to the Association of South East Asian Nations (ASEAN). However, the ASEAN Leaders in Cambodia on November 11, 2022, resolved only in-principle to admit Timor-Leste as the 11th member of ASEAN. Timor Leste has observer status at all ASEAN Meetings including at the Summit plenaries. A road map is being devised to enable Timor-Leste to attain full membership, but this is unlikely in the near future.
In 2020, the parliament had authorised a cost-benefit analysis of the commitments by the previous government to Greater Sunrise and the associated Tasi Mane project. This led to the shelving of these projects, and the write-down of the government’s equity in the Greater Sunrise Joint Venture from US$ 673 million to zero.
The National Budget for 2023, worth US$ 2.16 billion, supports the FRETILIN priority for fighting poverty and child malnutrition and improving food security. Compared to the previous year, this Budget also reduces spending by 8 per cent, or US$ 264 million.
The Central State Budget is largely financed from the Petroleum Fund, which stood at US$16.338 billion at the start of 2023. The sustainable withdrawal was calculated at US$490 million, but the actual withdrawal will be US$1.346 billion, indicating a continuing unsustainable drawdown on the Petroleum Fund.
According to the State Budget, the Bayu-Undan gas-liquids field was expected to end production in 2022, so petroleum revenue is estimated to be just US$115.2m in 2023 and beyond.
Under the current spending trajectory, there is a risk of hitting a fiscal cliff in 2034 at which point around US$ 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 ultimately living standards. It would also result in a shortage of US dollar currency, unless Timor-Leste devises its own currency by then. Modest spending cuts, tax increases and economic growth, however, would see the Petroleum Fund continue to operate until 2045, allowing more time for sustainable economic transition away from petroleum.
If Gusmão is able to create a winning coalition for the coming election, and resume the Tasi Mane project, and pay Timor’s share of the development cost of the Greater Sunrise fields, all of the Petroleum Fund and much more would be committed in the next few years. Everything seems to be staked on these coming 2023 Legislative elections.