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Monday, September 13, 2010

Timor Leste goes backward on economic competitiveness and wealth gap



Dili, 13 September 2010

Timor-Leste goes backward on economic competitiveness and wealth gap

Timor-Leste's ranking in the World Economic Forum's 2010-2011 "Global Competitiveness Report" has fallen from 127 to 133 of 139 countries.

The report ( by the Geneva-based Forum follows a warning to the Timor-Leste de facto government headed by Mr. Xanana Gusmao from a senior United Nations representative that a lack of economic growth in the Timor-Leste countryside is widening the gap between rural and urban areas.

FRETILIN MP and former Prime Minister and Minister for Agriculture, Estanislau da Silva, said today the Forum's Global Competitiveness Report showed Timor-Leste rated near-bottom in areas such as infrastructure (138 out of 139), technological readiness 139, financial market development 136, health and primary education 132, higher education and training 130 and innovation 136.

"Factors identified as the most challenging for doing business - for between 15 and 20 per cent of respondents - included access to financing, an inefficient government bureaucracy and inadequate supply of infrastructure. For between 10 and 15 per cent of respondents the biggest concern was corruption," Mr da Silva said.

"This downward trend in attracting investment is extremely worrying from the point of view of building a sustainable economy that will create jobs and eradicate poverty," he said.

"Public spending from the very large budgets generated by petroleum revenue over the last three years has been misdirected and has failed to benefit the poor, especially the rural poor outside of Dili, who make up around 85 per cent of the population.

"The biggest beneficiaries of government largesse has been the Dili-based political elite and their families."

Mr da Silva pointed to a letter from the deputy head of the United Nations' mission in Timor-Leste and representative of the United Nations Development Program (UNDP), Mr. Finn Reske-Nielsen to Prime Minister Xanana Gusmao which expressed grave concerns regarding Timor-Leste's ability to meet its human development goals.

In the letter dated 25 June 2010 and only recently shown to MPs by parliamentary advisors, Mr. Reske-Nielsen states the UN's view that "..... a disquieting feature of recent development pattern has been the growing disparities between rural and urban areas. This is an undesirable trend considering that the vast majority of the Timorese population live in villages dependent upon subsistence agriculture. Persistent deprivation of the rural areas is already manifesting itself in migration, particularly of youth, to the urban areas.....Budgetary allocation to the agricultural sector, in the past, has perhaps not been commensurate with the needs of the rural population....there are concerns that the inequalities might have worsened over the past few years."

Mr. Resle-Nielsen also questions Mr Gusmao's assumptions in his so-called Strategic Development Plan on economic growth and therefore poverty eradication, saying, "It may be pertinent to mention that these countries (countries in south-east Asia that have been able to grow rapidly while simultaneously reducing poverty) did not rely solely on 'trickle down' but put policies and programs in place to make growth inclusive."

Mr. Reske-Nielson also warns the government that, "The realization of double digit growth rates visualized under SDP is inextricably linked to the incremental capital-output ratio which in turn is an indicator of how well we use our capital resources. In the context of Timor-Leste where the cost of doing business is very high due to inadequate infrastructure and lack of enabling environment, the assumed ratio of 5 may not materialize."

(Link to letter:

Mr da Silva said: "It is clear that nobody outside the de facto government actually believes that the government's policies and irresponsible spending spree is actually resulting in sustainable economic growth and alleviation of poverty.

"Mr Gusmao's own former Deputy Prime Minister Mario Carrascalao has spelled out a litany of policy and governance failures, with a dire warning that as a result, 'difficult days ahead must be anticipated.' "

For further information please contact Estanislau da Silva MP on +670 733 5062

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