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Chronic poverty deepening in Timor-Leste

Chronic poverty deepening in Timor-Leste

Expected oil and gas revenues of Timor Sea must target rural
development and skills improvement to lift the world's
youngest country out of poverty, says report


Dili, Timor-Leste, 9 March 2006 — Four years after gaining independence, impoverished Timor-Leste remains one of the world’s least-developed nations, says the country’s National Human Development Report 2006, launched in the capital, Dili, today by the Government and the United Nations Development Programme (UNDP).

The UN’s newest member state ranks below all ASEAN countries on the human-development index. Half the population lacks safe drinking water, 60 of 1,000 infants born alive die before their first birthday, and life expectancy, at only 55.5 years of age in 2004, is not improving.

Against a backdrop of continuing withdrawal of the UN presence and the decline of foreign assistance to Timor-Leste, the report, entitled The Path out of Poverty: Integrated Rural Development, concludes that though politically the country is free, its people remain chained by poverty.

Despite this troubled outlook, the first Millennium Development Goal—reducing poverty by one-third by 2015—is still within reach. To achieve this goal, the report contends, the country’s economy must grow by between five and seven percent, depending on the extent to which this growth reaches the rural poor. Though this is a challenging prospect in a country where the per capita yearly income is $370 and falling, hope may lie offshore.

Brightening prospects?

On 12 January, 2006—after the completion of this report —Timor-Leste signed a treaty with Australia allowing oil and gas development projects to go ahead in the Timor Sea, which lies between the two countries. While harnessing undersea hydrocarbon resources is a challenging and lengthy process, the potential value of the reserves is estimated to be in the billions of dollars.

“Given the likely revenues from oil and gas, this [the MDG poverty goal] is technically feasible and financially affordable, so it would be difficult to justify any plan that did not aim to achieve the poverty goal,” says the report.

The report stresses that as 80 percent of households in Timor-Leste earn a living from agriculture, revenues from oil and gas will be effective in reducing poverty only if they are channeled towards rural development and the accompanying education, healthcare, and job training that allow citizens to improve their lives independently.

"It is vital for us to ensure that these funds are managed in a way that benefits all communities in Timor-Leste,” said Timor-Leste Prime Minister Mari Alkatiri. “This includes widening opportunities for the poorest populations in rural areas. It is also important for us to be forward-thinking and to wisely save and invest a portion of this money for future generations.”

The Government of Timor-Leste has already moved to safeguard any potential oil and gas wealth. In June 2005, the nation’s Parliament unanimously approved the creation of a Petroleum Fund to serve as a single account into which all petroleum revenue will be deposited, and from which all development funds will come. Nonetheless, Timor-Leste will need to rely on technical support from its partners to build much-needed human and institutional capacity for development.

Equity and distribution: integrated rural development is essential

As personal income slips and international personnel depart, the potential resource injection comes at a critical moment for Timor-Leste. But Path out of Poverty warns that future economic growth must not be offset by a rise in inequality.

Poverty in Timor-Leste is already most severe in the rural areas. The vast proportion of current investment is directed to Dili, the capital, and only one-third of total public expenditure and one-fifth of goods and services target rural districts.

Yet the overwhelming majority of Timor-Leste’s people work in fields, not cities. The primary task, therefore, is to create a more dynamic rural economy that will enable farmers and rural communities to raise their own standards of living–and work their way out of poverty, says the report.

“Growth will have to start with agriculture, which employs nearly three-quarters of the labour force,” said Sukehiro Hasegawa, Special Representative of the Secretary-General and UNDP Resident Representative in Timor-Leste. Increased productivity in the agricultural sector is also imperative, as Timor-Leste is currently not able to produce enough staple food to meet domestic needs.

The report offers recommendations for the Government to help the poor work their way out of poverty:
• Improve access to credit for farmers by establishing a Rural Development Bank;
• Initiate land reform to prevent further degradation of overused land, including the issuing of titles to provide security of tenure;
• Encourage unification of dispersed communities to allow a more effective and efficient provision of public services;
• Support fiscal decentralization to increase substantially the share of public funds allocated in the central budget to rural areas;
• Establish rice and maize production and marketing cooperatives for major irrigation schemes in targeted areas of the country;
• Encourage transport cooperatives connecting the main production areas with major consumer markets, while improving construction and maintenance cooperatives for rural roads to schools and health posts;
• Provide credit and incentives to entrepreneurs who have the ability to take risks to set up businesses in rural areas.


Education and skills-building

Timor-Leste has made significant progress in establishing the basic institutions of public administration, says the report, but they all suffer the same weakness: a lack of skilled people. An urgent priority for the nation, therefore, must be to raise the country’s level of education, skills and capacity.

At present, two-thirds of women and half of men between the ages of 15 and 60 are illiterate. This figure should improve as more children receive formal education, the report says, but between 10 percent and 30 percent of primary school-age children still are not attending school.

In his message for the report, Timor-Leste’s President Xanana Gusmão underlined the importance of ensuring compulsory basic education for all. “Our institutions and our people are inadequately equipped with the skills required to deal with more complex issues related to economic and social development of our country. Enhancing skills and building human capabilities of the poor is particularly important and can have a major impact on their productivity and human dignity,” he said.

Participation by all citizens

On the political front, the report highlights the major positive steps Timor-Leste has taken in recent years, embracing the return to democracy that has allowed its people a much greater say in determining the country’s future path.

The country is said to be “in the vanguard of popular participation”. With great potential for development in the offshore hydrocarbon reserves, the report stresses that the challenge for Timor-Leste now lies in “ensuring people throughout the country have the capacity to take advantage of these opportunities”.

### ### ###

About UNDP: UNDP is the UN's global development network, advocating for change and connecting countries to knowledge, experience and resources to help people build a better life. The organization is on the ground in 166 countries.

Note to Editors: The 2006 Human Development Report for Timor-Leste is the first to incorporate the figures of the 2004 national census, making it more comprehensive than the first Human Development report prepared in 2001.


ENDS

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