The True Test of East Timor

Jakarta Globe

Dalih Sembiring | February 06, 2011

East Timor, officially known as Timor-Leste, is
experiencing an economic boom. The problem is
that it_s only happening in the country_s
capital, Dili, and it_s only benefiting a small number of people.

Fernanda Borges, known as one of the most vocal
members of East Timor_s Parlamento Nacional, has
a clear idea of what is driving the country_s
economy and why it is so focused on the capital.

_At the moment, it_s all about construction.
Everyone wants to be in construction and development,_ she said.

It_s a situation that has fueled double-digit
growth in the country_s economy over the past
three years. But, according to Borges, all this
success could be coming at the expense of more
balanced growth in other sectors of the economy.

_Not much attention is being paid to creating
conditions necessary for us to be able to, say,
strengthen our livestock and horticulture
exports, which a lot of women are involved with,
on the border between Indonesia and East Timor._

Interviewed in his brand new office in Dili, the
country_s president, Jose Ramos-Horta, agreed with Borges_s assessment.

_Dili is becoming a boomtown. We have traffic
jams almost all day long _ the number of cars and
motorbikes has exploded in the last two years.
You see thousands of stores and shops in the
city, but drive an hour outside of Dili and you
see next-to-zero development in rural areas._

This lack of growth in rural areas seems
entrenched, despite 12 percent annual increases
in the economy over the last three years. Over 60
percent of businesses are centered in the capital city.

Those living outside of Dili have, by and large,
been forced to fend for themselves.

In Bobonaro district, farmer Rui Naibau Melo has
been keeping himself updated on the progress of
repairs to a bridge over the Loes River along the
main route between the district_s capital Maliana and Dili.

The bridge was damaged over two weeks ago, but,
to date, no crews have shown up to fix it. Rui
frequently ships his cattle along this route and
if the bridge collapses, his livestock and other
goods will have to be shipped via a far more
demanding route to reach Dili_s markets.

This is just the tip of the iceberg when it comes
to the problems Rui is facing in his livestock business.

As one of only four cattle suppliers in Bobonaro,
Rui has not been allowed to continue trading his
cows and water buffaloes across the border into
Atambua in East Nusa Tenggara (NTT), Indonesia,
since new regulations took effect last August.

_My cattle exports to Indonesia were slowed down
in 2005, when the Indonesian government issued a new regulation,_ Melo said.

_Before that, I could easily send cattle across
to Atambua twice a month, about 80 to 100 cows each time._

Bobonaro is one of East Timor_s three districts
that border NTT. In its vast, hill-fringed dry
fields and savannas, cows, water buffaloes and
goats are set loose by their owners to graze.
Fences are not part of the local custom here.

Just like in many parts of Indonesia, the animals
here function as financial assets, and are a common form of belis , or dowry.

Traditionally, grazing cattle have been moved
from East to West Timor and vice versa according
to what land had the best pasture.

The establishment of a definitive border between
the Dutch-colonized western half and the
Portuguese-colonized eastern half of the island
in the early 20th century made this practice more
difficult, but it wasn_t until Indonesia took
control of East Timor between 1976 and 1999, that
cattle herds began to be thought of as business
assets rather than just personal possessions.

After gaining its independence in 2002, East
Timor was allowed to ship 2,000 head of cattle to Indonesia per year.

But many of these small suppliers have become
inactive due to their inability to compete with
the illegal trade of livestock and other goods
that is rampant along the country_s borders.

Helio Sinatra Tavares, executive director for
external trade at East Timor_s Ministry of
Tourism, Commerce and Industry, is aware of the
illegal trade along the border that takes place
in Batugade, Salele and Bobometo.

_This is happening behind everyone_s back. The
border is so wide that even 500 border police are
not going to be effective,_ Tavares said.

As a preventive step, the Indonesian government
has threatened to blacklist any East Timor cattle
suppliers caught engaging in this illegal border trade.

Yosep Bere Buti in Atambua, Belu district, used
to have a permit to sell cattle he imported from
East Timor to several Indonesian buyers, but he
thinks obtaining and keeping these permits up to
date is becoming more trouble than its worth.

_Since 2005, I have to get the permit all the way
from the Directorate General of Animal Husbandry
in Jakarta and it_s only valid for three months,_ Buti said.

_Moreover, the price of cows from Maliana has
gone up. Meanwhile, the East Timor government has
raised the number of cows allowed for each
shipment outside the country to 50, which is a
big number for the buyers there._

The familial relations and a shared language and
culture that exist between inhabitants of
Indonesian West Timor and independent East Timor
have helped create good conditions for business
partnerships, but the harsh fact remains that
almost all of what Indonesia imports from East
Timor can also be obtained domestically.

Mech Saba, head of the NTT_s Chamber of Commerce
and Industry (Kadin NTT), said there is no
commodity that Indonesia really needs to import from East Timor.

A lack of structure and oversight adds to the
difficulties of doing business with East Timor.

The world_s second-youngest nation has yet to
push a lot of laws and regulations through its
parliament. As a result, Doing Business, a
cooperative study by the World Bank and the
International Finance Corporation, recently
ranked the country 174 out of 183 economies in
the ease of doing business category.

Meanwhile, East Timor is importing a great deal,
with the largest amount of merchandise coming from Indonesia.

According to a draft of the World Bank_s
Diagnostic Trade Integration Study in August
2010, Indonesian goods accounted for 47 percent
of East Timor_s total imports between 2004 and 2008.

But until something changes, East Timor, a
country of nearly 15,000 square kilometers in
size and slightly over one million people, will
be forced to rely on exports of its horticultural
commodities as a main source of income.

The country is also getting creative in hunting buyers for its goods.

Big and small entrepreneurs have been
increasingly making use of a nonprofit
organization named Peace Dividend Trust.

The organization specializes in connecting
sellers with international agents working inside and outside the country.

The effort is undertaken either through direct
lobbying or using the organization_s Internet
business database and matchmaking service, which
can be found online at timor.buildingmarkets.org.

There has been a 240 percent increase in visits
from Indonesian buyers in the six months since
the site was translated into Indonesian last July.

PDT, with it_s slogan, _Buy Local, Build
Timor-Leste,_ has been a big help in the eyes of local business owners.

As of the end of 2010, the organization was
responsible for over 13,000 new contracts with
approximately 12 percent of these being in the
agricultural sector _ the vast majority being
cattle, mungbeans, and soybeans _ and over 600
tenders being distributed to East Timorese entrepreneurs.

There are, of course, obstacles for smaller
entrepreneurs, but it turns out that the main
obstacle boils down to simple communication.

A cross-border event hosted by PDT last November
on the border of Bobonaro and Indonesian West
Timor, attended by entrepreneurs, government
officials, representatives of the chambers of
commerce, customs officials and border police
from both sides, resulted in the realization that
the main barrier to improving border trade is
getting everyone on the same page.

Domingas dos Santos, a PDT representative, has
made multiple trips to West Timor in an attempt
to find and break down communication barriers.

On one trip she discovered that buyers there
found that the crops from East Timor were of poor quality.

_The PDT began working with the [Bobonaro]
Chamber of Commerce to hold workshops. We
informed [farmers] about the right way of
planting and looking after their crops and
harvest. As a result, these farmers are selling a
lot more of what they grow,_ said Santos.

East Timor_s Chamber of Commerce and Industry
(Ccitl) is also lobbying countries other than Indonesia.

_Starting this year, one company will be
exporting large amounts of turmeric to China,
which is also interested in our fruits and wild
scorpions,_ said Ricardo Nheu, vice president of the Ccitl.

_We are cooperating with Malaysia for [the
opening of] rubber plantations. We are trying to
open ways to export cattle to Malaysia too. The
biggest importer of our coffee is the US and Europeans like our spices.

_Everything we grow is organic,_ he added.

_The government is just beginning to focus on
larger export items that can balance out our
trade deficit. The next step is giving subsidies
and fighting for a banking loan system to support the export sector._

The challenges are many, but the world_s
second-youngest country is far from taking them lying down.

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