Asia Times: Indonesia proves to be Timor's economic lifeline



	January 13, 2000	atimes.com

Southeast Asia

Indonesia proves to be Timor's economic lifeline
By Sonny Inbaraj

DILI - As East Timor struggles to kickstart its economy, its former occupier, Indonesia, ironically seems to be emerging as its main trading partner.

Air services, halted last September, resumed on January 3 and the first commercial flight to the capital, Dili, was by Indonesia's state-owned Merpati Nusantara Airlines. Merpati plans two flights a week from Jakarta to East Timor, but no decision on air fares has been made yet.

''We are still waiting for a decision on air fares as well as waiting for the new Indonesian interests section office to be opened in Dili, which is expected later this month,'' a company spokeswoman said.

The Indonesian interests section is scheduled to be opened on January 27 by President Abdurrahman Wahid during a visit to East Timor, which in August voted to break away from Indonesian rule. ''This will indicate a normalization of ties between East Timor and Indonesia,'' said Gil Alves, an East Timorese businessman who has returned home from Jakarta.

''It makes sense for East Timor to rely on trade with the Indonesian ports of Surabaya and Denpasar rather than Darwin in northern Australia,'' he added. ''Though Darwin is only 500km away from Dili, the Australian freight charges and the port handing costs are just too expensive. Coupled with that, we have to comply with very stringent Australian quarantine regulations which adds on to the shipping charges.''

At present most investment in the fledgling nation has so far come from Australia, with Darwin as the main staging ground for the movement of goods. But, according to a recent World Bank assessment, acute shortages are leading to spiralling prices. A price survey by the Bank indicated a 200 percent rise in the consumer price index for poor households in Dili between August and October.

Since the Indonesian rupiah is the de facto legal tender in East Timor, it makes sense, says the World Bank, to exchange goods and services with Indonesia. The Bank recommends restarting the flow of goods and services, including an agreement on border trade, with Indonesia-controlled West Timor.

The UN chief in East Timor, Sergio Vieira de Mello, agrees with the World Bank view. ''It is clear to me that West Timor in particular and other areas like Surabaya and Denpasar will become the main trade partners of East Timor,'' he told reporters in Dili last week.

But certain East Timorese leaders within the territory's main political platform, the National Council of Timorese Resistance (CNRT), feel investment opportunities must be sought beyond Indonesia and full trading links be established with northern Australia.

CNRT leaders Xanana Gusmao and Jose Ramos-Horta plan a regional tour from January 23 to canvass business opportunities from countries other than Indonesia. Ramos-Horta told IPS the two independence leaders would visit Singapore, the Philippines, Thailand, South Korea and China.

''This is a great opportunity to seek investment in agriculture and tourism,'' Ramos-Horta said. ''There is tremendous agricultural potential along East Timor's south coast. The country is very fertile. The production could feed the entire population and be exported to northern Australia.''

But Andrew MacIntyre, associate professor of Pacific International Affairs at University of California, San Diego, argues that East Timor has a clear interest in good rather than bad relations with Indonesia. ''East Timor needs to pursue a policy of functional diplomatic engagement with Indonesia. Notwithstanding the past violence and tension, as a matter of priority East Timor needs to work to find a means for diplomatic coexistence and if practicable, cooperation. There would be many advantages to East Timor if this were so.''

But MacIntyre points out that East Timor would need to secure its membership in the Association of Southeast Asian Nations (Asean) in order to cement its credentials with the region as an entity independent from Indonesia.

Ironically, however, it seems Indonesian President Abdurrahman Wahid is keen for East Timor to join Asean. In November he secured agreement from Thailand's Prime Minister Chuan Leekpai to support any eventual bid by East Timor for membership in the regional grouping. Wahid told Chuan he hoped Indonesia and East Timor could forget the past as the territory becomes independent after a brutal quarter-century of Indonesian rule.

(Inter Press Service)

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