TIMOR-LESTE GOVERNMENT RAIDS PETROLEUM FUND IGNORING THE LAW

FRETILIN.Media FLASH:

Dili, 27 January 2011

De facto Government MPs table proposal to increase budget by US$282
MILLION for
dodgy and non-transparent Infrastructure Fund. It was in turn accepted
without retort by the government, namely the de facto Prime Minister and
Finance Minister.

The increase in the budget is allegedly to pay for cost blowouts for two
power stations, substations and transmission lines, in turn a result of
the procurement fiasco that was the “second hand heavy fuel power
stations” from China.

The proposal increases the original budget for the electricity sector
investment from US$166.7 million to US$448.7 million. There were no
satisfactory detailed justification as to how this money would be spent.

This increase takes the budget in just one day, from US$985 million to
US$1.26 billion, an increase of 28% on the budget proposal, and nearly
twice in
excess of the 3% of the sustainable income estimate under the Petroleum
Law.

It also represents 18.3% of the balance in the petroleum fund as at
December 2010 of US$6.9 billion.

Without doubt this action has irretrievably eroded the petroleum fund’s
sustainability.

This breaches the section 9 of the Petroleum Fund Law:

*Article 9*

*Transfers Exceeding the Estimated Sustainable Income*

*No transfer shall be made from the Petroleum Fund in a Fiscal Year in
excess of the Estimated Sustainable Income for the Fiscal Year unless
the Government has first provided Parliament with:*

*(a) The reports described in paragraphs 8 (a) and 8 (b);*

*(b) A report estimating the amount by which the estimated Sustainable
Income for Fiscal Years after the Fiscal Year for which the transfer is
made will be reduced as a result of the transfer from the Petroleum
Fund of an amount in excess of the Estimated Sustainable Income of the
Fiscal Year for which the transfer is made;*

*(c) A report from Independent Audit certifying the estimates of the
reduction in Estimated Sustainable Income in paragraph (b) above; and *

*(d) A detailed explanation of why it is in the long-term interests of
Timor-Leste to transfer from the Petroleum Fund an amount in excess of
the Estimated Sustainable Income.*

This proposed withdrawal now exceeds the limit of the value that the
government is legally permitted to withdraw from the petroleum fund
without providing the detailed justification as set out above. None
has been provided.

There is no doubt whatsoever that this was done not just with the
knowledge but also at the initiative of the de facto Prime Minister, as
he accepted it without the usual retorts.

The fact that this was not ever included in the original proposed
budget law that came before the parliament, nor during the committee
hearing process. This is a blatant illustration of this government’s
incompetence in public finance management. As stated in a recent IMF
report evaluating Timor Leste’s public finance management, “fiscal and
budgetary policies lack a solid medium-term perspective,” and “the
Ministry of Finance lacks the time and capacity for adequate review of
rationale, costing and impact of public investment.” This raises a lot
of questions of this government’s programs and projects, especially in
the area of infrastructure development.

There are no alternatives to a legal challenge to this budget law when
the “majority” rubberstamps this budget law, as they will without
question or scruples.

FOR FURTHER INFORMATION PLEASE CONTACT JOSE TEIXEIRA ON +670 728 7080


Jose A. Fernandes Teixeira
Deputado da Bancada Parlamentar da FRETILIN
Parlamento Nacional da Rep. Dem. de Timor-Leste
Telemovel: +670 728 7080

Member of Parliament – FRETILIN
National Parliament of the
Democratic Republic of Timor-Leste
Mobile: +670 728 7080

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