by Lindsay Sobel
Sept.10, 1999

If East Timor's referendum ever does result in the birth of a new nation, that country will have to build a government and an economy from the ashes of war. After a quarter-century of brutal occupation, East Timor's people are some of the poorest in the world. They are awash in adversity and nearly devoid of the tools necessary to boost their standard of living. But there are a few natural resources -- not least among them coffee and oil -- which hold hope of a self-sufficient future for the East Timorese.

Timorese leaders and observers are optimistic about the economic prospects for the half-island. Even as East Timor slips into anarchy, leaders are beginning to make plans for a new nation they have reason to believe can make it on its own. But East Timor's potential for generating wealth may be a double-edged sword: While that potential offers promise for the province's future, it is also one of the primary reasons Indonesia is so reluctant to give the province up.

Xanana Gusmão, president of National Council for East Timorese Resistance (CNRT), said at a development conference in Melbourne, Australia this year, "We are practically starting from zero in all areas. It is necessary to identify each area, research it and program it, with relation to the global picture in which we will engage thereafter ... so that we can obtain the necessary short-, medium- and long-term sustainability."

East Timor is starting from zero for two reasons. First, the Indonesian government or its citizens control nearly everything of value on the island. Second, years of war have left the land scarred and underdeveloped, and most of its people uneducated.

Overcoming Suharto
One of the largest problems facing and independent East Timor may be former-President Suharto. During his presidency, Suharto and his family acquired 40 percent of East Timor's land and huge chunks of its businesses (not to mention enormous holdings in Indonesia.) Whether they did so by force or through nominally legal means is a matter of debate and a flaccid investigation by the Indonesian government. Among the Suharto family's holdings related to east Timor are oil wells, sugarcane plantations, marble deposits, a coffee exporting business, and several oil-related companies.

Key military and government figures associated with the Suhartos also control vast swaths of the East Timorese economy. They run the largest construction firms, a pearl-diving company, most of the hotels, and all of the sandalwood production, according to a study by Australia-based East Timorese academic George J. Aditjondro.

Staking claim to what they feel is rightfully East Timor's, pro-independence leaders have said that if the province becomes free, they will take back millions of dollars worth of properties held by the Suharto family and its cronies.

The present Indonesian government controls major parts of East Timor's infrastructure, including banks, electric generators, and all governmental record-keeping. In addition, it pays 85 percent of East Timor's $116 million annual administrative budget. According to the Wall Street Journal, Jakarta has promised an orderly transfer of power to the United Nations' provisional leadership. It has even indicated it would continue to fund the budget until next March. However, recent events may be harbingers for more broken promises.

It would be catastrophic if Indonesia cut ties with East Timor without a careful transition. The World Bank's Claus Rohland says, "The tricky thing for East Timor is to move into [independence] without unduly antagonizing Indonesia." However, Rohland added that he is "quite impressed with the determination of the potential future leadership to solve all these problems in a peaceful and constructive way."

Oil: A sticky issue
The greatest obstacle with Indonesia may be over the vast oil reserves in the sea between East Timor and Australia, known as the Timor Gap. In 1989, Indonesia and Australia signed a treaty that split the sea into three parts. One is controlled by Australia, and one by Indonesia. Another is jointly operated, and the revenues are divided between the two countries. The oil fields in the Gap are on the list of the world's 23 largest, and oil output today reaches about 30,000 barrels per day.

There is already some indication that the treaty may be renegotiated if East Timor becomes independent. Xanana Gusmão has said that he does not recognize the Timor Gap treaty as valid. Constancio Pinto, representative of CNRT to the United Nations told MoJo Wire that the Timor Gap "is not Indonesian territory any more once [East Timor] becomes independent ... The Timor Gap treaty definitely will be renegotiated." However, he added that Indonesian companies operating in the Gap may continue to operate.

According to Sutomo Sudomo, technical director of the Australian Indonesian Joint Authority for the Timor Gap Zone of Cooperation, "The East Timorese can't instantly take over control of the Timor Gap if it becomes independent. The case is not that simple since the Timor Gap covers an area which Indonesia can also claim."

"If East Timor becomes an independent country, there will be three countries which can claim control over the area: East Timor, Indonesia and Australia," Sudomo said.

But Indonesia was sending mixed signals earlier this week on the issue. Indonesia's Mines and Energy Minister, Kuntoro Mangkusubroto, told journalists Tuesday that "Indonesia is ready to cancel the Timor Gap Treaty with Australia."

Some of the companies operating in the Gap may soon recognize East Timor's right to a portion of oil revenues. According to Oxford's Peter Carey, East Timorese resistance leaders have met with key oil companies operating in the region to discuss the future of the Timor Gap. In addition, at least one senior Australian politician has called on the Australian government to push Jakarta to hand over its portion of the Timor Gap treaty to East Timor.

A nascent coffee industry
Agriculture also holds promise for East Timor's economy, but faces large obstacles. East Timor's many small coffee growers have benefited from coffee's trendiness in the West. East Timor's farmers have been too poor to buy pesticides; now Western coffee importers such as Starbucks pay high prices for its organic beans.

Many East Timorese coffee farmers own their own small farms. In the past, Indonesia controlled most of the exporting -- and reaped most of the profits. However, the National Cooperative Business Association, with a grant from US Agency for International Development, set up a cooperative which markets Timorese coffee overseas. While this cooperative, called Café Timor, inspired some optimism about coffee production in an independent East Timor, Aditjondro reports that even these transactions are partly controlled by the Suharto family.

Other potential elements of a post-occupation economy include marble-mining in East Timor's substantial mineral reserves, fishing off its coasts, and tourism. Gusmão has said, "A beautiful country like East Timor with its ... heroic history, must not be promoted through a tourist industry which creates a small modern world of luxury hotels but rather [through] ecotourism as a means to promote the unique identity ... of our people." Some observers have even suggested establishing a casino industry offering gambling to tourists from Indonesia (where gambling is illegal).

For tourism to thrive -- and to maximize farming -- East Timor would have to work to improve its environment. Once a lush and beautiful island, occupation and war have left their ugly marks. The Indonesian military bombed and napalmed whole swaths of forest and farmland during the invasion and occupation. Now, many areas are beyond rehabilitation. According to the Canadian East Timor Alert Network's Kerry Pither, who recently traveled to East Timor, there are "whole patches where trees are missing ... It looks ravaged." In addition to the loss of trees and plantlife, deforestation has caused devastating erosion in many areas.

Perhaps the greatest challenge for East Timor is educating enough of its people to manage the bureaucracy of a new nation. Presently, more than half of the East Timorese population is illiterate. What teachers it has it may soon lose, as 80 percent of secondary-school teachers are Indonesian, and are expected to leave the island. Fearing an educational crisis, the Catholic Church is already working to implement a literacy program for East Timor's schools. Says Gusmão, "It should be the policy of our new East Timor State that there is compulsory and free education for all."

Help from abroad
Though many in East Timor are wary to discuss the future when the present is so uncertain, independence leaders and the international community have gingerly begun to discuss the economic prospects for East Timor if it becomes independent. For example, several governments have already hinted they may offer financial aid to the impoverished province. These include Australia, Canada, and the European Union. Portugal, which the United Nations still recognizes as the colonial power in East Timor, has offered to pay its administrative budget for five years.

In addition, several large Portuguese companies have formed a holding company that would invest in infrastructure. And the Asian Development Bank has said it would help build infrastructure in East Timor, but only if it becomes a member of the UN's Economic and Social Commission for Asia and the Pacific.

Hoping to help East Timor coordinate aid so that no help is wasted, the World Bank has already taken small, but concrete, steps to prepare for the possibility of independence. This past July, the World Bank held a two-week training program for a core group of people it expects will play key roles in the East Timorese economy. They trained the small group in issues such as setting up a tax system, and negotiating the international economy, and hope to hold sessions for more people in the coming months.

Says the World Bank's Rohland, "We see our role very much in helping the East Timorese to build capacity in the country to enable them to be in the driver's seat over the next year." He said the "nightmare" would be if East Timor received a lot of aid and it was not used in the most efficient way.

On the eve of the referendum, Indonesian President B.J. Habibie gave a speech aimed at preventing the need for aid to a new nation. He reminded East Timorese how much money Indonesia spends on the province in hope of swaying their votes. Though the obstacles facing an independent East Timor are daunting, its resistance leaders believe no challenge compares to the danger and heartbreak of living under Indonesian occupation. Today, they are desperate for the chance to prove all that the nation of East Timor could be.