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JOINT COMMITTEE ON FOREIGN AFFAIRS díospóireacht -
Tuesday, 27 Sep 2005

Project Timor-Leste: Presentation.

The next matter on the agenda is a discussion with officials from the Department of Foreign Affairs concerning the draft report on Project Timor-Leste or, as we knew it in the past, East Timor. I welcome the representatives from the Department of Foreign Affairs and Development Co-Operation Ireland, namely, Mr. James McIntyre, first secretary in the political section, Mr. Damien Boyle, first secretary on the Asia desk, Mr. Noel White who is concerned with programme countries and Michelle Ryan, higher executive officer on the Asia desk. We look forward to hearing their views.

It is proposed to discuss the development programme for Timor-Leste. Comprehensive briefing material was circulated and it is expected this material allied to today's discussion will feed into the draft report currently being prepared for the committee by Mr. Brian Arnold. We also circulated an overview of Trócaire's work in Timor-Leste and further information from Gorta which is also active in the region. The report being prepared is expected in the near future and when it is available we will circulate it.

I invite Mr. Noel White to commence proceedings by making a brief presentation. The discussion will then be open to members. Obviously, other personnel from the Department of Foreign Affairs can contribute as required.

I thank the joint committee for inviting us today. I have given the secretariat the full text of my remarks. In my presentation I will be as succinct as possible but I will also be thorough, as this item requires. We welcome the committee's decision to draw up this report. We will continue to work closely with it and are at its disposal and that of its officials for any assistance that might be required with the report.

I intend to outline the development needs and challenges facing Timor-Leste, as well as Ireland's response to them. I will also look ahead to the factors that will shape our policy in coming years. First, however, I will briefly recall the historical backdrop against which we are operating in Timor-Leste.

Timor-Leste was subject to Portuguese colonial rule until 1975. Following a civil war, FRETILIN or the Revolutionary Front for an Independent East Timor declared independence. Indonesia invaded and annexed East Timor in 1975 and it was estimated at the time that up to one third of the pre-invasion population had perished during the resistance. In August 1999 a United Nations supervised referendum took place in which there was a large vote in favour of independence. This was followed by a systematic campaign of violence conducted by pro-Indonesian militias in which the death toll was up to 1,200 people. A total of 70% of all private residences, public buildings and utilities were destroyed. Public services collapsed and more than 75% of the population was displaced. Timor-Leste achieved independence on 20 May 2002. That is the context, with which most of us are broadly familiar.

With regard to development needs, it is important to have a sense of precisely what is required and what are the challenges facing Timor-Leste which is one of the poorest countries in the world, with a GNP per capita of $420, a little more than $1 a day. It is the poorest country in Asia and its human development indicators invite comparison with the poorer African countries. The UNDP’s human development index for 2005 ranks it at 140 out of a total of 177 countries. Ireland is ranked eighth.

What does this mean in practical terms for the people of Timor-Leste? We could offer endless statistics but will not do so. However, there are key indicators which give a succinct picture of what we face. Life expectancy at birth is 56 years; 40% of the population live below the national poverty line, while 48% lack access to a safe water supply. As a new state, Timor-Leste has effectively started from scratch. There was no administration and no institutions to restore. Timor-Leste faces enormous challenges as a post-conflict country in nation building — extreme poverty, high population growth, a weak and stagnant economy, high unemployment, lack of capacity in the public sector and low levels of service delivery in key sectors such as health and education.

What has been our response? The Irish public took a strong and sympathetic interest in Timor-Leste's struggle for independence, due in large part to the efforts of Mr. Tom Hyland and the East Timor-Ireland Solidarity Campaign. That commitment was shared by other NGOs. Ireland played an active role up to Timorese independence. It participated in the UN observer team; a platoon of Irish troops served with the UN peacekeeping mission and it provided humanitarian and recovery assistance. In October 2002 Ireland established diplomatic relations and in November that year a representative office, headed by a development specialist, was established in Dili.

In March 2003 Timor-Leste was designated Ireland's seventh programme country. The current programme country strategy covers the period 2003-05 and has a budget of €11.1 million. Its key components are support for the transitional support programme of the government, capacity building in the public sector, support for local government, promotion of gender equality, promotion of democracy and human rights and sectoral support.

The transitional support programme is the main vehicle of support for Timor-Leste. It allows donor funds to be effectively channelled through the World Bank trust fund to support the implementation of the Timor-Leste national development plan. It focussed initially on the creation of government institutions, a legislative and regulatory framework and the strengthening of public sector management, all key areas in which there is a major lacuna. This has been followed up with a successor programme entitled the "consolidation support programme". In 2005 we allocated €2 million under this heading. The absence of capacity across all the institutions of government is the single most serious constraint facing Timor-Leste. We are supporting capacity building in two ways — through an UNDP programme, which provides advisers to help run government departments and to mentor Timorese officials, and through direct assistance to the capacity building co-ordination unit within the Prime Minister's office. Funds have also been provided for a personnel management information system and a sum of €600,000 was allocated in 2005.

With regard to local government, we have provided assistance for local village councils, elections to these councils and studies on options for the organisation and arrangements of local government in the country. I refer to the promotion of democracy and human rights. We are working with the UNDP to strengthen the justice sector, which is seriously under-resourced, as well as working with civil society organisations involved in human rights education and training. A sum of €300,000 was allocated in 2005. With regard to gender equality, assistance is being provided to the office for the promotion of equality, which is located in the Prime Minister's office. The mandate includes the promotion and mainstreaming of gender in government and a sum of €300,000 was allocated in 2005. In addition, funds are also being provided to Irish NGOs, including Trócaire and Concern under DCI's multiannual programme scheme in respect of their activities in Timor-Leste. In 2004, €280,000 was provided but final figures are not available for this year.

Looking to the future, Timor-Leste experienced an economic boom in 2000 and 2001, which was largely fuelled by the reconstruction activity undertaken by the international community. However, as was expected at the time, GDP declined again in 2002 and 2003 by approximately 6% each year. Growth was modest in 2004 but with estimated population growth at 3%, GDP per capita is still declining and can be expected to decline further. The medium-term prospects for economic growth and development are limited. Offshore gas and oil production is expected to contribute more than $5 billion in revenues over the next two decades but the full impact of this on the economy will not be felt for years. The government has put in place a prudent and well respected savings and expenditure policy based on international best practice. It is the correct mechanism for the management of finite resources and it provides for transparent management and independent oversight while ensuring future generations benefit. Consequently, the challenge of providing the population with sustainable income and of driving the economy in the immediate future will fall to sectors other than oil and gas. Timor-Leste will continue to face a funding gap and will continue to require strong support from its development partners.

DCI's current strategy programme for Timor-Leste expires this year. A stocktaking exercise has concluded that, broadly, the areas supported by the programme are closely aligned to the country's needs and the modalities for its delivery are also aligned to the particular situation of Timor-Leste. Work is under way at official level on drawing up a new country strategy for the period 2006-08. The details are being worked out but the overall thrust at this stage is towards consolidation of the existing programme. The Timor-Leste national development plan will likely remain the main vehicle for DCI support. This ensures our assistance is aligned with the policies and priorities of Timor-Leste, that it is co-ordinated with other donors and that the people of Timor-Leste are in the driving seat regarding their own development, which is an important consideration. Any decision on an increase in the overall allocation must take account of the absorption potential on the ground and the related capacity considerations both here and in Timor-Leste. We will continue to work closely with the authorities and civil society in Timor-Leste to ensure optimum use of Ireland's development support.

The challenges facing the government of Timor-Leste are daunting but considerable progress has been made. The government has made very effective use of the resources and support provided by the international community and the basic institutions of government are in place. The government has given strong leadership. It has put in place a prudent legal framework for oil production and revenues. It is working hard to establish the institutions and machinery of the state and deliver visible improvements in the quality of life of the people of Timor-Leste. However, Timor-Leste is likely to remain dependent on the continued assistance of the international community for a number of years. It is important that the progress achieved so far is consolidated and that it does not diminish before the economy reaches a sustainable growth path. Ireland's support to date is the tangible expression of its commitment to the development of Timor-Leste. Development Co-operation Ireland looks forward to continuing to give effect to this commitment.

We will try to answer any questions posed or give any additional information the Chairman or members may request.

First, I wonder about the money situation. Did Mr. White say a sum of €5 billion was expected over ten years?

Over 20.

I note there is a reluctance to release too much money too soon in case it would overheat the economy as the rate of inflation is low. Some 70% of those over the age of 30 years have never attended school. This will lead to a major problem in the future. I do not like repeating it but I introduced second-chance education in 1989. Much of the driving force in the economy has come from providing education for all those in Ireland who missed out on it in the first instance. While so much has happened here, some 10,000 are taking part in second-chance education courses this year under the scheme introduced by the Department of Social and Family Affairs. There are also other educational schemes available, including FÁS schemes. There is a huge reservoir of talented individuals but unless they receive an education, they will not have an opportunity to develop their talents. Given that so much money is coming down the line, some of it should be released in an orderly way for capital infrastructural and educational projects to try to advance these developments and allow Timor-Leste to be better prepared.

Mr. White did not refer to the political structure currently in place or when the next elections would take place. However, I will not take up any more time and will now invite members to ask questions.

I thank Mr. White for his remarks. Going back to the Chairman's question on funding and the work Trócaire does, I understand the organisation has a number of partners in Timor-Leste. Will Mr. White provide me with some further information?

Mr. White referred to the boom times of 2000 and 2001 and mentioned international assistance and the presence of the UN peacekeeping mission. Will he indicate what international assistance contributed to the boom?

I too welcome the group and thank Mr. White for his presentation. What is the population of Timor-Leste, as I cannot see the figure in the documentation provided? Has Development Co-operation Ireland got somebody on the ground there and what other countries are donors? How does Ireland rate with regard to its funding there? The report on Timor-Leste is a good news story. It is wonderful to hear that a country where something was so badly wrong and 70% of the population was displaced because of violence, is starting off with a clean slate. We would all support as much funding as possible for the country.

I found the presentation fascinating. I was going to ask about the population in order to put the size of the problem into context. It is great to see a country such as Ireland giving intelligent aid and concentrating on capacity building in Timor-Leste. The Chairman mentioned education and Mr. White mentioned that Timor-Leste had a mini boom that was, more or less, demand led. There will eventually be money from oil and gas, but that is still some years away. What is happening with regard to basic education in the country? Is it anticipated that it will come on stream when there are people with the capacity and ability to benefit from funds? The expected €5 billion from oil and gas is a significant amount and could turn many heads in Ireland, never mind Timor-Leste. Is there a basic primary education system in place in the country?

I am delighted to see the delegation from the Department and to hear there is such progress. Has the support group in Ireland remained in office since Timor-Leste obtained its freedom and maintained a good relationship with that country? Mr. Hyland ran a great campaign, which shows what one person can do. While he had the backing of other organisations, he was the leading light in that regard. Ireland should be well regarded in terms of future trade potential with Timor-Leste. It is important that we build a good trading relationship with it because of the potential and growth opportunities. Tourism will be a significant industry there as the country has great potential We should remain conscious of its benefits as a trading partner.

Will Mr. White elaborate on the problem of corruption? What is being done in that regard? Language comes into question when discussing education. Is Portuguese the spoken language and is this a major problem from our point of view?

I thank the members for their questions and constructive remarks. I will deal with the question of population and then try to take the remaining questions in order. According to the latest census figures available to us, the population is 920,000, but this figure is rapidly increasing due to a very high fertility rate which links in to the question of GDP per capita and the capacity of the whole socio-economic sector.

We are not surprised the question of the oil revenue was raised by committee members. As I stated in my opening remarks, the mechanism which has been put in place for managing and organising the revenues coming onstream from offshore oil and gas is regarded not just by Development Co-operation Ireland, DCI, but by the donor community in general, as the right model. It is recognised by the World Bank as a model of best practice and the bank has been quite complimentary about this.

The mechanism reflects, in general, the overall prudent approach that the Timor-Leste authorities have adopted to governing the country, beginning from what was essentially a blank slate. It is based on a Norwegian model with some add-ons for accountability and transparency. I mentioned corruption in that context, purely in the sense that this is seen as the best model available in terms of avoiding corruption and ensuring proper management and transparency and above all, ensuring the wealth which will come on stream will flow for the present and future generations. The authorities have adopted the best model and they have been commended for doing so by the Department and by others.

The Chairman referred to the potential for overheating in the economy and subsequent imbalance were these funds to come onstream too quickly. This is a factor which provokes the current prudent approach. However, it implies that our ongoing commitment is based on acceptance of the fact that this mechanism is in place and that at a certain point those funds will come onstream. Our view that this is the right way to go is shared by our donor partners. There is every basis for continuing our donor support to Timor-Leste.

The economic boom which occurred in 2000-01 was largely related to the presence and the activities of the international community, such as UN bodies and so on, who were on the ground at the time. This resulted in the building of infrastructure and support systems for the international bodies. The economy had an input of salaries and foreign exchange. As was expected at the time this was a growth without a solid basis, the artificiality of which would become clear and a more realistic economic progression would happen. The economy at the time benefited from a lot more money but as the UN and other bodies reduced their personnel and their involvement in the country, the figures became more realistic, such as those provided in my presentation, showing a decline in 2003.

On the question of other donors, I do not have precise figures for all the donors. Those with a presence in the country include Portugal, Japan, the United States of America, Australia, Ireland, New Zealand, the UK, Brazil, China, Korea, Thailand, Malaysia and France. A whole series of multilateral organisations are involved such as the World Bank, the UNDP, UNICEF, etc.

Are the contributions from other donors similar to Ireland's contribution?

It varies considerably. I do not have figures to hand regarding all their contributions. It is no surprise, given the historical context, that Portugal is one of the highest donors, at €31.5 million for 2005. This is an indicative figure. Ireland's figure for 2005 is approximately €3.7 million or €3.8 million. Other donors are involved but not present in the country, particularly, Germany, Norway and Sweden.

Deputy Olivia Mitchell asked about education. This sector, with the health and justice sectors, is one of the key sectors in which there is a major gap in the overall institutional capacity and structure of the country. However, there is some good news with regard to education. There is a sense, certainly in regard to primary education, that net enrolment figures are increasing, although very slowly, and that pupil-teacher ratios are decreasing, again quite slowly. On the basis of indicative figures that have become available to us, the pupil-teacher ratio for 2005 is 41:1, although differences occur across the country.

One of the difficulties is that Timor-Leste, as a young country, is trying to ensure it has comprehensive and properly representative statistics on what is happening across the country. We have helped in that area in terms of voting registers, national censuses and so on. With regard to our programme for next year, we are considering the possibility of finding an entry point for providing support to the education sector. However, there is a mantra that applies across many of these sectors, namely, that while there is a willingness to provide funding, the question is whether there is an entry point on the ground to make a contribution that provides substantial added value to the programme. We must try to find a way in, either through a sectoral project approach from Development Co-operation Ireland or through some of the international partners which might already be working on the ground in that area.

Is there an education structure at present?

No, the structure is extremely limited and uneven across the country, and language issues arise between Portuguese and Tetum. There are enormous challenges. We hope to confirm funding this year towards school magazines, educational material and so on. However, the figures are quite limited — of the order of €100,000 to €200,000. Clearly, there is a willingness to go further if we could find a reasonable way in.

Senator Leyden asked with regard to the East Timor Ireland Solidarity Campaign. We still work closely with Mr. Tom Hyland. If I am not mistaken, he is in Timor-Leste at present. I had hoped to speak to him before attending the committee today but could not do so as he was there.

I hope he got some recognition in Timor-Leste.

While I am not certain whether he has a title, he is certainly well known. This was reflected when the Timor-Leste President and Foreign Minister visited Ireland, in that Tom Hyland featured prominently in their perception of Ireland's contribution.

Has he been appointed honorary consul for Timor-Leste in Ireland?

I am not sure. When I referred to not being certain whether he had a title, I thought that position had been suggested at one time. However, I have no information that he is honorary consul.

I am sure the Department would endorse him if he is appointed.

Absolutely.

Mr. White referred to the model arrangement. Do you have available the details of this arrangement?

I have extensive detail on it. I thought it better to spare you the detail in the presentation but I can provide the model, with diagrams.

You know what they say: the devil is in the detail.

As a civil servant, I know that.

Banks can rely on a stream of funds coming from oil and gas. Can Timor-Leste borrow or invest in this way, however prudently? One can talk about prudence but if people are living on a dollar a day, what has prudence got to do with it? The people need education if they are to get from their current position to some sort of enterprise development stage. Some 85% are dependent on subsistence agriculture as is common in many of the countries in which DCI works. Many of the measures in use in other countries may apply in the case of Timor-Leste. Is coffee its main crop?

Coffee is almost exclusively the main crop in the region.

I understand the coffee it produces is of a high quality.

That is correct. I understand Starbucks is involved in the region.

Is there a co-operative system in place? In the early days of its inception, the EU set up producer groups to assist farmers in organising their production. Some of these groups developed into co-operatives while others evolved into more commercial types of enterprises. The EU organised the ventures and provided grants for the grading and treatment of produce and so on. However, this has always involved a good deal of bureaucracy, perhaps even more so now.

These are fundamental issues. This committee wishes to gain an understanding of where the Timorese people stand and identify the most relevant issues and the most useful strategies to assist them. As members have said, it is a high priority area but one with reasonable prospects for the future.

Will Mr. White confirm that a contract has been secured with Starbucks?

I understand the coffee produced in Timor-Leste is generally regarded as a high-quality java which is organically grown. I am not sure of the precise extent of Starbucks's interest but it has a certain involvement. I shall pass this question to my colleague, Mr. Damien Boyle, who knows more about high-quality java.

I ask Mr. Boyle to bear in mind that the committee is interested in Fairtrade coffees. They are available in the restaurants in Leinster House.

Mr. Damien Boyle

My understanding is that the java coffee produced in Timor-Leste is of a high quality and organically produced. I understand a number of leading United States coffee chains, including Starbucks, source the coffee and market it as Timorese produce. A developing structure is in place to enable small producers to obtain the best value for their produce and attempts are ongoing to identify a Timorese coffee brand. These efforts will be enhanced by the quality considerations attached to the product and the fact it is now being presented by chains such as Starbucks as Timorese coffee.

That is a positive development. However, my concern is that coffee producers may become heavily dependent on a monopoly buyer. There are positive aspects to securing such contracts but also a negative element in terms of the consequences of a future pull-out by the buyer. In such an eventuality, would the producers have nobody to whom to sell their produce?

Mr. Boyle

Such contracts are helpful in that they oblige producers to meet certain quality standards and provide them with assistance in terms of how best to process the coffee to ensure it meets the requirements of the purchaser.

Those are positive aspects but such contracts may also constitute a tyranny.

Mr. Boyle

That is correct. However, Timorese coffee is a desirable product for which there is considerable demand.

It is the job of DCI to eradicate tyrannies and its workers devote their time in that endeavour.

I wish to respond to the Chairman's point regarding the funds that are becoming available and the basis this may provide for funding infrastructural growth in Timor-Leste. There is no doubt that an advantage of the mechanism which has been put in place is that it provides the possibility of foreseeing to some extent the type of growth possible. However, the Chairman is correct in stating that the main issue is to identify what is most important to the people of Timor-Leste at this stage. This must be considered in the context of the 40% of the population who live below the poverty line and the prevalence of chronic institutional capacity issues in the education, health and, in particular, justice sectors. I have not provided much detail on the latter but it is an area in which we have tried to offer some assistance.

This is the basic machinery of state and it is generally acknowledged internationally that the Timor-Leste Government has adopted a sound approach to the business. In essence, it has committed itself to sustainable growth and poverty reduction. At present, its focus is clearly on the economic and social sector, combined with strict financial discipline. As far as possible, where it can organise expenditure, it attempts to do so.

There is a problem in securing the expertise within government and within the public administration to ensure that budgets are spent. This is a particular difficulty in the education sector where the moneys allocated are not being spent. Deputy Mitchell asked about this. We try to help them with this as far as possible by providing expertise, back-up and the basis on which they can do these things themselves. However, the record of the Timor Leste Government is positive. It is internationally recognised as being good and positive with the right approach.

Many of the systems mentioned by Mr. White and which are noted in his other report appear to be very good. The work being done on governance and the fact that the donors work together on a best practice basis is excellent. I do not want that to be misunderstood and the joint committee members greatly appreciate it.

When 85% of the population are engaged in subsistence agriculture, one is coming from an extremely low base. We came from a very low base ourselves in that regard. Many people today might not realise it but the European Union eventually provided that base for us. There have been arguments about taking it back or modifying it in recent years, but that price base made the difference. It gave those engaged in agriculture time to adjust and meet market needs and allowed people to move off farms into other activities.

There is not yet much to see as far as enterprise and foreign investment are concerned. How does it look now? Obviously they need stability. Although it is always asserted that politicians are not needed, the first thing one finds in any of these countries is that politicians and a parliamentary system where people agree to argue their differences in a democratic way are needed. No one will invest otherwise. That is the reality, unless they are involved in massive corruption, of which there have been some examples. The building of the basic structures has not been under way for very long.

On that point, one area in which we work with the Government and people of Timor Leste is by providing the basis for the establishment of a solid and dependable legal and regulatory framework. As the Chairman has rightly noted, this is closely linked to the kind of support which tries to encourage the private sector to assist the economy. Part of the overall approach taken by international donors is to ensure that private sector development is encouraged as far as possible. Quite clearly, however, unless the regulatory framework is in place, it is very difficult for private operators to operate.

Support at local level has been mentioned. Under the heading of support for local government and local democracy, funds are allocated to our office in Dili for local projects in the countryside and elsewhere. The funds go to local communities to promote matters such as empowerment, gender rights, sensitising people to the political framework, basic work in the area of health and education, building classrooms and so on. Moneys are allocated through the budget to the representative office in Dili so these funds can be released quickly to local communities. We find this extremely useful as it gives us our ears on the ground and feedback in terms of the types of issues that the Chairman raised about the agricultural sector, for example.

It is like the latent heat of steam. Much goes in but commentators in the media and politicians do not notice it, much as one does not notice the heat until the steam rises. People do not realise that an enormous amount of energy must be used, especially with these types of problems. Is any sort of social assistance or welfare in operation? There is a large number of unemployed and grossly underemployed people. Are the visitors aware of any figures at this time?

We do not have details of the precise package of social assistances available but it is reasonable to suggest that anything available at this stage is extremely limited. This comes back to issues of infrastructure, distribution and raising awareness among people of their rights and entitlements.

Does Deputy Carey have further questions?

I have been slightly preoccupied with a few other bits and pieces of information. I will investigate the topic more when I get a chance to read these papers.

On behalf of the committee, I thank our visitors for this discussion and for attending today. As they know, we are working on the project and would welcome their support. We want to make the programme as comprehensive as we can. Certainly there is information we need to gather. As the visitors can see, the committee's members are anxious to be as helpful as possible.

I thank the Chairman for his comments. We in Development Co-operation Ireland greatly appreciate the interest the committee has shown in this and other areas in which we work. We welcome its continued interest. We find it and these exchanges extremely helpful and useful and we welcome the profile it brings to the work of DCI. On the specific programme for Timor-Leste, we have already passed material to the committee, as has been mentioned. We have spoken to the committee's consultant and are ready to provide any information the members require to enhance their knowledge of the precise nature of the challenge and response. We look forward to continuing to give effect to Ireland's commitment in Timor-Leste.

I congratulate Mr. White on 2012. At the end of the day, he must be happy with the outcome. We look forward to working closely with the visitors and wish them every success in the important work they do. I also thank Mr. James McIntyre for attending.

Sitting suspended at 2.55 p.m. and resumed at 3.00 p.m.
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