BACK DOOR Newsletter on East Timor      home  June news

"Unfortunately, the IMF [International Monetary Fund] is not known for its democratic practices ... the IMF does not actively reach out to civil society in the countries in which it works. Notwithstanding this reputation, hopefully, the IMF will take its own advice to heart and seek the active participation of the East Timorese community in its work to shape the economic structures here." La'o Hamutuk: East Timor Institute for Reconstruction Monitoring and Analysis
See also: BD: Financing Reconstruction in East Timor - A collection of recent reports and articles

From: The La'o Hamutuk Bulletin

Volume 2, Nos. 3
June 2001

Issue focus: 
The International Monetary Fund in East Timor

Table of contents: To read this entire issue on the internet, or to download a printable PDF version of all of it, go to:
La'o Hamutuk Bulletin: http://www.etan.org/lh/bulletinv2n3.html




The International Monetary Fund in East Timor (overview)

The International Monetary Fund (IMF)’s direct involvement in East Timor dates back to 22 October 1999 when the IMF’s Executive Board approved a request from the United Nations Secretary-General Kofi Annan (1) to send a mission to East Timor and (2) to provide technical assistance in the Fund’s areas of expertise.

East Timor is not a member of the International Monetary Fund, as membership is only open to countries that conduct their own foreign policy. And as East Timor’s foreign policy is officially the responsibility of UNTAET, East Timor is presently not eligible to join the IMF.

Nevertheless, the IMF is present in East Timor and does play a role in shaping the country’s political-economy and in influencing reconstruction-related developments in the territory, especially as they relate to its economic institutions and policies.

According to the IMF’s publication, East Timor: Establishing the Foundations of Sound Macroeconomic Management (2000), it was critical to quickly establish a sensible economic framework in East Timor in the aftermath of September 1999. This was needed “to provide reasonable assurances to all the parties involved, including donors, that the resources to be made available to East Timor would be effectively used and accounted for.” Thus, the IMF “focused its technical assistance on helping UNTAET develop a macroeconomic framework to guide economic decision making and establish key financial institutions.”

It was the IMF, for example, that has led efforts to make the U.S.  dollar East Timor’s official currency during the reconstruction period—perhaps its most controversial public role thus far in the territory. It was also the IMF that recommended the establishment of a Central Payment Office (CPO) to safeguard funds and to make payments, and of a Central Fiscal Authority (CFA). The CFA, as part of  the East Timor Transitional Administration (ETTA), designs the embryonic government’s overall fiscal strategy. In doing so, it writes the ETTA’s budget (the East Timor Consolidated Budget), formulates tax policy, administers the collection of taxes, and coordinates the actual execution of the budget’s expenditures.

In addition, it was the IMF that urged the implementation of taxes on revenues from coffee, hotels, and restaurants. The IMF has also argued for low wages for East Timorese civil servants on the basis of ensuring the sustainability of the ETTA’s budget. In addition, the IMF’s November 2000 report, “East Timor: Recent Developments and Macroeconomic Assessment,” foresees future spending cuts, resulting in reduced spending on wages and salaries, as well as on goods and services. In the next fiscal year, for example, the IMF anticipates the need for an overall 6.5% cut in wages and salaries and a 13% cut on goods and services.

IMF staff recommended that the number of civil servants be relatively small and that the initial wage structure for civil servants be the same as it was during the Indonesian occupation—about US$1,000 per year, or about $83 per month. (At present, civil service salaries average US$123 per month, ranging from $85/month to $361/month.)

The IMF has provided analysis and strategy advice regarding the Timor Gap’s oil and natural gas reserves. IMF staff have also helped develop plans for, and urged the creation of, a national statistics institution, primarily but not exclusively to gather economic data.

There are basically two IMFs in East Timor: one concerned with budgetary matters, and one that offers technical assistance.

The members of the first IMF see themselves as representatives of, and advocates for, the donors to East Timor. They are the ones who argued for lower wages. If they do not like what the CFA is doing—if, for example, they think that the budget the CFA is drawing up is not fiscally responsible—they are in a position to make the relationship between UNTAET/ETTA and the donors difficult.

The technical assistance arm of the IMF helps to create a fiscal infrastructure through which East Timor’s emerging government can design and implement a budget, collect revenues, make payments, and develop relevant practices and regulations. In this regard, the IMF has helped to identify and hire experts from abroad whose job is to run the CFA and the CPO and to hire and train East Timorese who will eventually take over the running of these agencies. The IMF presently contributes half of the salaries for the following positions: Finance Cabinet Member/Head of CFA; Commissioner, East Timor Revenue Service; CPO General Manager; CPO Deputy General Manager for Supervision; CPO Deputy General Manager for Payments; and CPO Chief Accountant.

In its year 2000 publication on East Timor, the IMF urges East Timor to ensure that its short-term fiscal policies “are consistent with setting a strong foundation for sustained growth and poverty reduction over the medium to long term.” Furthermore, the Fund argues that East Timor will only be able to develop a sound, long term macroeconomic strategy “through a very active participation of the East Timorese at all stages of the process—including design, implementation, monitoring and, if required, reformulation of the objectives and policy priorities.” Unfortunately, the IMF is not known for its democratic practices—unlike the World Bank, for example, the IMF does not actively reach out to civil society in the countries in which it works. Notwithstanding this reputation, hopefully, the IMF will take its own advice to heart and seek the active participation of the East Timorese community in its work to shape the economic structures here.

According to a 15 March 2000 report in The Wall Street Journal, the IMF sees one of its aims in East Timor as reducing the territory’s dependence on international donors. “They don’t want to live on charity longer than they have to,” the paper quoted Luis Valdivieso, the IMF’s Head of Mission and Special Representative to East Timor, as saying.

As La’o Hamutuk wrote in Vol. 1, No. 2 of the Bulletin, “charity” is a very problematic term by which to characterize international funding for East Timor. As many, if not most of the major donors to East Timor provided Indonesia with significant amounts of weaponry, funding, and diplomatic cover for its invasion and occupation of East Timor, such “charity” is better seen as a very modest start to reparations.


Tetum: (the most common East Timorese language)
La’o Hamutuk, Instituto Timor Lorosa’e ba Analiza no Monitoring Reconstrucao  Updated May 18
Saida mak La’o Hamutuk? La’o Hamutuk organizasaun klibur Ema Timor Lorosa’e no Ema Internacional ne’ebe buka atu tau matan, halo analize ho halo relatorio kona ba hahalok (actividade) instuisaun internacional ne’ebe oras ne’e haknaar iha Timor Lorosa’e, liu-liu hahalok sira ne’ebe iha relasaun ho rekonstrusaun fizika no social Timor Lorosa’e nian. La’o Hamutuk fiar katak Povo Timor Lorosa’e mak tenke hakotu iha procesu rekonstrusaun ne’e nia laran no procesu rekonstrusaun ne’e tenke demokratiku no transparante duni.
Staf Timor oan: Inès Martins, Fernando da Silva, Thomas Freitas; Staf Internasional: Pamela Sexton, Mark Salzer; Kuadru Ejekutivu: Sr. Maria Dias, Joseph Nevins, Fr. Jovito Rego de Jesus Araùjo, Aderito Soares
Local Contact:  P.O. Box 340, Dili, East Timor (via Darwin, Australia)  Mobile fone: +61(408)811373;  Telefone Uma: +670(390)325-013
International contact: +1-510-643-4507 Email: laohamutuk@easttimor.minihub.org  Homepage: http://www.etan.org/lh
Boletim La’o Hamutuk: [Tetum PDF format]
Vol. 1, No. 4, 31 Dejembru 2000 Banku Mundial iha Timor Loro Sa’e: http://www.etan.org/lh/PDFs/lhbul4tm.pdf
Vol. 1, No. 3, 17 Novembro 2000 Hari Sistema Saude Nasional iha Timor Lorosa’e:  http://www.etan.org/lh/PDFs/LHbul3tm.pdf
Vol. 1, No. 2, 17 Julho 2000 Protesaun ba meio ambiente iha TL: http://www.etan.org/lh/PDFs/bulletin02tetum.pdf
Vol. 1, No. 1, 21 Juñu 2000 Rekonciliasaun: http://www.etan.org/lh/PDFs/bulletin01tetum.pdf

English:
La'o Hamutuk: East Timor Institute for Reconstruction Monitoring and Analysis  Updated May 16
La'o Hamutuk (Tetum for Walking Together) is a joint East Timorese-international organization that seeks to monitor, to analyze, and to report on the reconstruction activities of the principal international institutions. It believes that the people of East Timor must be the ultimate decisionmakers in the reconstruction process and that the process should be as democratic and transparent as possible ...
East Timorese staff: Inès Martins, Fernando da Silva, Thomas Freitas; International staff: Pamela Sexton, Mark Salzer Executive board: Sr. Maria Dias, Joseph Nevins, Fr. Jovito Rego de Jesus Araùjo, Aderito Soares
International contact: +1-510-643-4507  Email: laohamutuk@easttimor.minihub.org  Homepage: http://www.etan.org/lh
La’o Hamutuk Bulletin: http://www.etan.org/lh/bulletin.html
Mar 23 2001 LH: Job announcement for La'o Hamutuk in East Timor: http://www.pcug.org.au/~wildwood/01marjob.htm
Activity Report: Mar 16 2001 LH: http://www.pcug.org.au/~wildwood/01marlhreport.html


See also:

BD: Financing Reconstruction in East Timor - A collection of recent reports and articles

Tetum:
Dej 31 2000 BLH: Demokrasia ho Banku Mundial iha Timor Loro Sa’e Editorial added May 18
"Eksperiensia hatudu katak presaun públika bele influensia oin sa Banku hala’o nia seruisu iha nasaun partikular ruma. Maski susar, Timor Loro Sa’e sorte ona hodi iha sektor ONG nebe iha korajen, elite politik nebe relativamente responsivu ba kuantidadi ka ema sira nebe hili iha baje (grassroot constituency), no movimentu solidaridadi internasional ida nebe forte. Hola hamutuk ba, faktor sira ne’e bele halo diferensa atu bele garante katak Banku Mundial serve necesidadi Timor oan sira nian, du ke nia kontráriu." La’o Hamutuk, Instituto Timor Lorosa’e ba Analiza no Monitoring Reconstrucao

Dec 31 2000 LHB: Democracy and the World Bank in East Timor  Editorial & link to Analysis updated Feb 26
"Experience shows that concerted public pressure can influence how the [World] Bank works. East Timor has a vibrant NGO sector, a political elite that is relatively responsive to grassroots constituencies, and a strong international solidarity movement. Working together, they can help ensure that the World Bank serves the East Timorese people’s needs, rather than vice-versa." The La'o Hamutuk Bulletin

Tetum:
Jul 17 2000 BLH: Ajuda Internasional ba Timor Lorosa’e: Misericordia?  Editorial from ETimor added Apr 4
"La’o Hamutuk husu ba nain ulun UNTAET tahan atu fo osan ba Timor Lorosa’e nudar “misericordia”, ita tenke hare sira nudar modesto hanesan compesacao husi governo nebe fahe sira nian responsabilidade ba povo Timor Lorosa’e nia terus no destrucao nacao-la’os deit iha Septembro 1999, maibe durante 24 anos nia laran." La’o Hamutuk, Instituto Timor Lorosa’e ba Analiza no Monitoring Reconstrucao

July 17 2000 LHB: International Funding for East Timor: Charity?  Editorial from ETimor added Apr 4
"La'o Hamutuk calls upon UNTAET officials to refrain from referring to funds donated to East Timor as "charity" -- especially when the vast majority of these funds come from national governments which provided significant economic, military, and diplomatic support to Jakarta and its illegal occupation of East Timor. Rather than seeing these funds as "charity", we should see them largely as a modest beginning at amends from governments who share in the responsibility for the suffering of the East Timorese and the destruction of the country -- not only in September 1999, but in the almost-24-year period that preceded it." La'o Hamutuk: East Timor Institute for Reconstruction Monitoring and Analysis


BACK DOOR Newsletter on East Timor      home  June news
Website: http://www.pcug.org.au/~wildwood  Email: wildwood@pcug.org.au
Postal address: BACK DOOR GPO Box 59 Canberra City ACT 2601 Australia
Receive FREE weekly email Web-updates: email wildwood@pcug.org.au and include the words "Subscribe BACK DOOR" in the message header. more info