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E. Timor Must Overcome Many Economic Problems to Strengthen Democracy - 2002-12-21

East Timor became the world's newest nation in 2002, but as it embarks on its journey of independence, the tiny country faces the challenge of building its economy.

East Timor's long anticipated independence came on May 20, 2002. After almost three years of control under the United Nations, 25 years of Indonesian rule and more than four centuries of Portuguese occupation, East Timor's people finally gained independence.

Diego Hey heads the U.S. Peace Corps team in East Timor, which works to improve the country's health and agriculture. He described the atmosphere in the aftermath of independence.

"It's funny, right after and two or three weeks after there was silence, it was almost palpable, people were expecting something. They didn't know if there would suddenly be great changes," he recalled.

This sense of expectation led many to believe that independence would quickly solve the country's economic problems.

Some observers conclude that the student protests in December, which led to riots and left two dead, were a manifestation of unfulfilled expectation - others say it was the harbinger of future insurgency. But Foreign Minister Jose Ramos Horta, a 1996 Nobel Peace Prize laureate for his work in helping push East Timor's independence, said the riots, while causing damage, were in fact minor.

"It is almost like a cliché to attribute every demonstration to poverty to unemployment. What happened was an aberration and there were manipulators, instigators," he said. "The United Nations failed to intervene in a timely fashion - I'm not criticizing the U.N., the peacekeeping forces are not here to stop civil unrest. And our own police are not fully trained and equipped."

The decades under former Indonesian leader Suharto were marked by the brutal rule of the Indonesian military. But much of East Timor's infrastructure was destroyed when violence broke out in the weeks surrounding a U.N.-sponsored vote in September 1999. The referendum showed a nearly unanimous desire to separate from Indonesian rule.

In the weeks before and after the vote, supporters of Indonesian rule, the pro-Indonesian militias, swept through East Timor, maiming and killing the people and their livestock. Human rights groups say the Indonesia military certainly did nothing to stop the militias. Many observers say some soldiers participated in the violence.

Despite three years of reconstruction, the scars of the 1999 violence are everywhere. Much of the country's capital, Dili, remains in ruins. East Timor's leader President Xanana Gusmao works in the aptly named Palacio de Cinzas, "palace of ashes."

Diego Hey described his first visit to the presidential quarters. "One side of the room had two tattered and disreputable looking chairs and I remember...there was a slip of paper and it had the words, 'the president of the republica.' It was scotched-taped to the back of one chair. The walls were blackened, there was no electricity, there were bare wires hanging from the ceilings," he said.

One of the most prominent of the aid organizations in East Timor is the World Bank, which together with the Asian Development Bank channels millions of dollars in donor money into a trust fund for public spending.

In roughly three years, East Timor will begin to receive revenue from its natural gas and oil reserves. Until the infrastructure to extract the fuel is built, foreign aid will continue to fund the government.

In the past few years, the United Nations interim government (UNTAMET) had an artificial effect on the economy - the influx of foreign workers help drive a small service sector and create jobs. As UNTAMET was dismantled, there was a precipitous decline in the demand for services.

Elisabeth Huybens, an economist for the World Bank in East Timor, pointed out that "The period of 2000 and 2001 of course was a period of heavy reconstruction during which UNTAMET ... brought a lot of international presence, all of which created a somewhat artificial economy that grew indeed at very high rates, in fact, 18 for 2000 and 20 percent in 2001."

The World Bank thinks East Timor has fallen into recession this year, with growth contracting by more than one percent. The decline is being felt in the capital city, Dili, where unemployment is rising. And the forecast for next year is even worse, with the economy slowing by two percent or more.

Maria do Ceu Federer, who is the president of Timor Aid, a group involved in education and financing of small businesses, said: "We have currently approximately 80 percent of unemployment at the young sector, which is very dangerous. They have all the time in their hands, they get frustrated, they see no way out; they lose hope, they end in trouble."

Timor Aid, like many agencies, is starting training programs in the hope of creating a skilled workforce that will attract foreign investment.

Ms. Huybens of the World Bank says that what is needed now are jobs for unskilled labor - jobs she says the government and aid agencies are creating through re-forestation and road building programs.

The next few years look difficult for this fledgling democracy. A drought this year is expected to hurt farmers. International aid organizations continue to leave.

While East Timor struggles to stand on its own, it can perhaps take stock of the country's biggest investment so far: Its people now have what they wanted for so long - independence and democracy.

Part of VOA's yearend series