The Timor gap
The Prime Minister, Mr Howard, says it is “generous”. The Northern Territory Chief Minister, Mr Burke, calls it “extremely generous”. The assumption is easily made that Australia has given something away in the framework agreement on sharing oil and gas reserves in the Timor Sea, especially because the final 90:10 formula for the Joint Petroleum Development Area (JPDA) in East Timor’s favour is some distance from the 60:40 split talked about previously.
It is wrong, however, to assume Australia has neglected its interests. Even if it had driven a harder bargain, it would not necessarily be better off than it will be under the agreement being signed in Dili today. As the Foreign Minister, Mr Downer, has said, Australia “wanted to be generous to East Timor because it’s in our interests that East Timor have a good, steady flow of revenue for the Timor Sea oil and gas reserves”. That is, it is better that East Timor has its own revenue sources to the maximum extent, to minimise its dependence on outside aid.
There are other reasons why Australia has done well. Even under the final revenue sharing formula Australia stands to gain greatly. The 90:10 split applies only to the JPDA; an 80:20 split applies to the Greater Sunrise field. Apart from about $1 billion in direct revenue over the next 20 years - compared with East Timor’s expectation of more than $7 billion - Australia will benefit substantially from the agreement’s provision for a pipeline to Darwin. Even the Queensland Premier, Mr Beattie, is talking of possible benefits to his State when Timor Sea gas can be piped from Darwin.
More important than how generous to East Timor today’s agreement might be is how East Timor husbands its share of the expected revenue. It will be imperative for East Timor to work hard to establish other sources of revenue, to generate sufficient levels of national income for essential services and, equally if not more importantly, to provide employment. On this score, today’s agreement is of little help. Australia, with the downstream benefits from the pipeline to Darwin, is the one which stands to gain more in employment and other terms from the Timor Sea development.
Income from the Timor Sea reserves will be vital to East Timor’s economy. But the oil and gas - and so the income - will not flow immediately. Meanwhile, East Timor’s need to build its economy and to increase employment is urgent. The longer unemployment persists, the harder it is for East Timor to recover from cataclysmic events of the past two years - the killing of East Timorese by East Timorese, the scorched earth policy pursued by the Indonesian military after the referendum for independence and the forced migration of East Timorese to West Timor and to other parts of Indonesia.
With the agreement signed today, East Timor has something to look forward to, in terms of its share of revenue from Timor Sea oil and gas. But that solves none of its immediate problems. Moreover, that revenue stream, even when it arrives, will be no magic wand. It will arrive to be wasted if the East Timor economy is not already well on the way to becoming functional. East Timor’s prospects of becoming truly independent will brighten today. But the international community generally and Australia in particular remain very much engaged with the task of working out how to help East Timor help itself.
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