The World Bank and IMF have set their sights on East Timor, a state officially born in May 2002

11 January 2023 by Eric Toussaint


(CC - Wikimedia - Alvaro1984 18 https://upload.wikimedia.org/wikipedia/commons/0/05/Indonesia_%28orthographic_projection%29.svg & Public domain, courtesy of the University of Texas Libraries, The University of Texas at Austin.

East Timor, located 500 km from the coast of Australia, won independence in May of 2002 after several decades of struggle. In 2003, when I went there at the request of the Timorese authorities, the country had a population of a little over 800,000; in 2021, it stands at 1.3 million, of which 60% are under 16 years of age. In 2003, two out of five Timorese were living on less than USD 0.55 per day. Three fourths of the population had no access to electricity, and half had no clean water. In 2021, 19 years after independence, the situation has not really improved: 46% of children under age five suffer from malnutrition, and 50% of the population has no access to wastewater treatment. [1]



46% of children under age five suffer from malnutrition, and 50% of the population has no access to wastewater treatment

A Portuguese colony until 1975, East Timor was annexed to Indonesia under the Suharto dictatorship (see box). The high points of the liberation struggle were in the 1970s, at the end of Portuguese rule, and in 1998–99 following Suharto’s overthrow by the people of Indonesia. The Carnation Revolution in Portugal in 1974 led to the independence of Portugal’s colonies Guinea-Bissau, Cape Verde, Angola and Mozambique.

Indonesia invaded East Timor in December 1975 with the complicity of the US, British and Australian governments

Thirty years after Indonesia’s invasion of Timor, certain US archives were made public. They establish indisputably what had long been suspected: Indonesia’s invasion of East Timor in December 1975 was with the connivance of the American, British and Australian governments, and it resulted in twenty-four years of bloody occupation and systematic violations of human rights. According to these documents, as early as March 1975, the State Department, then headed by Henry Kissinger, aware of Indonesia’s preparations for invasion, estimated that the US “has considerable interests in Indonesia and none in Timor.” When he learned about the special operations leading up to the invasion, Henry Kissinger asked his colleagues: “Can I trust you to keep quiet about this?” His fear was that Congress would decree an embargo on arms deliveries to Indonesia, an ally of Washington in the Cold War. [2]

We understand better the World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

’s making no allusion to, let alone criticizing, the invasion and annexation of East Timor at the time! Submission to the interests of the US and its allies the UK and Australia, and complicity regarding the dictatorship were constant components of the Bank’s behaviour.

Yet at the very start of the invasion, on 12 December 1975, the United Nations General Assembly condemned the actions of Indonesia’s armed forces and demanded that it [...] desist from further violation of the territorial integrity of Portuguese Timor [...]to enable the people of the Territory freely to exercise their right to self-determination and independence.”  [3] This was recalled in 1995 by the International Court of Justice in its Judgment of 30 June 1995 regarding the situation. [4]

The leading Timorese liberation movement, FRETILIN, which engaged in armed struggle for nearly 30 years, had a comfortable majority in the legislature in 2002. President of the Republic Xanana Gusmão was a historic FRETILIN figure. The liberation struggle after the fall of Suharto left more than 100,000 Timorese dead. From 1999, following a referendum in which the population voted overwhelmingly for independence, the country was placed under UN administration.
The country is very poor. Its economy lacked diversity and there was no industry. The main activity was agriculture (more than 75% of the population is rural). Aside from coffee for export, agricultural production was oriented towards meeting internal demand, which in reality was an advantage. The challenge for any economic policy aimed at improving living conditions for the population was to take the realities of that local agriculture into account. Yet after independence, oil and gas gradually became the engine of East Timor’s economy. There are large oil and gas reserves out at sea, where the Australian and Timorese territorial waters meet. Powerful Australian financial and economic interests managed to take over the lion’s share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. under the Suharto dictatorship. When Timor became independent and sought to renegotiate the agreements in order to recover its rightful share, Australia refused. The Timorese authorities considered appealing to the International Court of Justice in The Hague, but finally gave up the idea in the face of threats of economic reprisals by Australia. In the end there was an agreement with Australia and the Timorese authorities granted operating rights on the main offshore oilfield to the US firm ConocoPhilips. The country has become completely dependent on oil revenues. In 2020, revenues from hydrocarbons accounted for 76% of the State’s revenue and 99% of currency revenue. [5] That is an extremely high level of dependence.

In 2003 the government was against indebtedness for the country

In 2020, revenues from hydrocarbons accounted for 76% of the State’s revenue and 99% of currency revenue

The new State had the good fortune to come into being without debt and at first the government had made the wise decision to refuse to borrow. It was in that context that I was invited to meet with the country’s authorities. When I went there in March of 2003, the government was only accepting grants from the international community. The World Bank was frustrated because it had tried to impose an indebtedness plan. The Bank had to adopt a new strategy in order to convince the authorities to fall in line with the Washington Consensus. It managed to get itself appointed as the institution which coordinated the majority of grants coming from the international community. The Bank took a 2% cut of each grant for itself… a true scandal. It took advantage of its function as intermediary to coerce the Timorese authorities into applying neoliberal policies – eliminating customs barriers (to the detriment of local farmers, in particular rice producers), imposing a policy of cost recovery (high registration fees in higher education, payment for health care), privatization of management of the electricity sector and installation of prepayment electricity meters, etc.

The Bank took a 2% cut of each grant for itself… a true scandal

There is also another very grave phenomenon: only a small part of each grant (10 to 20%) actually reached the local economy. The World Bank managed to see to it that the majority was spent outside Timor, either in the form of remunerations paid to foreign experts or purchases of goods and services on the international markets.

The World Bank managed to impose the use of international consultants (some of them coming directly from the Bank) whose fees ate up 15% to 30% of the grants. The inequality of the fees paid is particularly striking. An international expert was paid at least USD 500 per day (not counting coverage of all their expenses in country), which is at least a hundred times what Timorese workers earn (3 to 5 dollars per day). The representative of the World Bank, whom I met in her office in Díli, the capital, earned something like USD 15,000 per month. And her colleague from the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
, who was paid the same kind of money, actively opposed the adoption of legislation that would have established a legal minimum wage. He even wrote, without hesitation, that a wage of 3 to 5 dollars a day was far too high.

An international expert was paid at least USD 500 per day (not counting coverage of all their expenses in country), which is at least a hundred times what Timorese workers earn (3 to 5 dollars per day)

Here are a few examples of the scandalous level of the fees paid to external consultants. They are taken from an article [6] in the daily The Australian published in April of 2009:

Ines Almeida is a media flak for East Timor’s Ministry of Finance. This year, she will earn a lot more than her Prime Minister, Xanana Gusmao, who has a base salary of $US1000 a month with a $US500 allowance.
 
Ms Almeida, a joint Australian-Timorese citizen who lives mostly in Timor, is treated as an outsider, paid in US dollars out of World Bank funds and grant money from individual nations. In her 2008-09 package, she earns a base of $US182,400 and picks up a further $US41,365 in travel expenses and living allowances, taking the package to $US219,765. [7]
 
[…]
 
Another Australian, Graham Daniel, is on a 12-month contract as a senior management adviser to the Finance Minister. For his 180 days’ work through 2008-09, he is being paid $US236,160, plus $US60,361 in reimbursible expenses and contingencies, bringing his package to $US296,521. Asked if he thinks the East Timorese would be shocked at how much he earned if they were aware of it, Mr Daniel says: “They shouldn’t be made aware of it. I wouldn’t be the most highly paid person in Timor. It’s consistent with what I’ve been paid in other countries. My contract is certainly fairly high, but others are getting a lot more.” [8]
 
[…]
 
A US citizen, Francis Ssekandi, is another senior adviser to the Finance Minister. His 2008-09 package, including remuneration and travel expenses, is $US424,427 for 272 days’ work. [9]

Note that at that time Francis M. Ssekandi was a judge at the World Bank Administrative Tribunal, a position he held from 2007 to 2013. [10]
The same article in The Australian continues, citing Timor’s then Minister of Finance Emilia Pires, among others:

“I earn $US700 a month,” Ms. Pires says.“
 
I personally think the money (advisers are paid) is too high ... Some of my advisers have been working in Afghanistan and Iraq and I had to compete to get them over here. It is way out of my control; we go by market standards. […] In post-conflict countries it is a complex job. Timorese people have not had the opportunity and education to do this. We need expertise. I am very much aware that technical assistance comes at a high price.”
 
Asked if she thinks the ordinary East Timorese people would understand the high pay packages, Ms Pires says: “I’m trying to explain to them. This is the world we live in. We all want to change the world, but I’m realistic.”
 
Fretilin MP and party vice-president Arsenio Bano says they would not understand. “A lot of Timorese often cannot even get $1 a day,” he says. “Fifty cents a day is a big thing. Even in a month some of them cannot get $5.
 
The country is very poor and they (consultants) are paid too much. $US200,000 is more than the money that is invested in roads in the district of Oecussi this year. It’s more than some of the school-feeding projects for 4000 students in one district of Ermera.” [11]

The Australian daily asked Nigel Roberts, World Bank Director for East Timor, New Guinea and the Pacific islands, about the situation and he answered: “Timor-Leste needs to pay these rates if it is to attract first-rate talent, which I believe it is entitled to and needs in order to make the transition out of poverty[...] Using cheaper expertise isn’t going to help develop the country. In an ideal world, this type of expertise would be provided on a voluntary basis, but unfortunately no employment market anywhere in the world works on this principle, and people don’t discount their services when they work in places like Dili or Moresby or Honiara.”  [12]

The paper adds that in March 2009, President José Ramos-Horta had said that “since independence about $3 billion has been spent on Timor but not in Timor.”  [13]That is what I was referring to above when I explained that the World Bank had pressured the Timorese authorities to agree to using the grants for Timor mainly to pay for goods and services purchased abroad. Nearly twenty years after independence, the bottom line is entirely negative. The advice given by the World Bank and the experts it recommended led only to the development of East Timor’s underdevelopment.

During the lectures I gave in 2003, I compared the attitude of the World Bank to that of Christopher Columbus and other conquistadors who, to gain a foothold in a territory, began by handing out gifts – beads and trinkets, for example – before beginning their pillage. The first time I made that comparison, I expected the audience to protest. No one did. In Timor, many people who are sincerely committed to rebuilding the country were very disturbed at the influence the World Bank had gained. They had the impression that their government itself had fallen under the influence of the neoliberal credo and were wondering how to set things right. In the years that followed, the Bank’s thinking indeed predominated and the country was locked onto the path of total dependence on fossil fuels exported without any processing. The result is that very few skilled jobs are being created for the Timorese and the country must import fuel since it has no refinery. Not to mention the fact that the reserves are quickly being used up and the country is going farther and farther into debt. All with no benefit to the majority of the population, 35% of whom are illiterate. [14]


Footnotes

[1French Treasury department (Direction générale du Trésor de la France), “Situation économique – Timor Oriental” 4 March 2021 (tresor.economie.gouv.fr/Pays/TL/situation-economique) [accessed 03/03/2022] .

[2Jacques Amalric, “ONU, une réforme menacée” (UN: A Reform Under Threat) (Daily Libération, Paris, 26 January 2006) (translation CADTM).

[3General Assembly resolution 3485 (XXX) 12 December 1975 (etan.org/etun/genasRes.htm) [accessed 11/01/2021]

[4ICJ, “Case Concerning East Timor” (Portugal v. Australia), Judgment of 30 June 1995, ICJ Reports 1995, p. 90 ff.) (icj-cij.org/public/files/case-related/84/084-19950630-JUD-01-00-EN.pdf) [accessed 11/01/2021]

[5Ibid.

[6Paul Toohey, “East Timorese go begging as foreign advisors rake it in” (The Australian, 25 April 2009) (etan.org/et2009/04april/26/25forei.htm) [accessed 29/03/2022].

[7Ibid.

[8Ibid.

[9Ibid.

[10World Bank Administrative Tribunal, “Appointment of new tribunal judges,” (tribunal.worldbank.org/index.php/news/appointment-new-tribunal-judges) [accessed 21/03/2022].

[11Paul Toohey, “East Timorese go begging as foreign advisors rake it in.”

[12Ibid.

[13Ibid.

[14French Treasury department (Direction générale du Trésor de la France), “Situation économique – Timor Oriental.”

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012, etc.
See his bibliography: https://en.wikipedia.org/wiki/%C3%89ric_Toussaint
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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