BACK DOOR Newsletter on East Timor      home June news

"They have come to help, with their 4x4 vehicles and consultants and experience of “helping” in Mozambique and India and Honduras. The United Nations, the International Monetary Fund (IMF) and World Bank, the bilateral aid agencies, and international non-government organizations (INGOs) are there by the score. They rent all the best houses for thousands of dollars a month, and they pay high salaries—$4000 a month or more sometimes—to skilled East Timorese, stealing the best people from already weak local institutions, and ensuring that any skilled people returning from abroad work for them. They are the international aid industry. " Joseph Hanlon
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:

Can East Timor survive the aid industry?
Some questions from Mozambique

By Joseph Hanlon

They have come to help, with their 4x4 vehicles and consultants and experience of “helping” in Mozambique and India and Honduras.

The United Nations, the International Monetary Fund (IMF) and World Bank, the bilateral aid agencies, and international non-government organizations (INGOs) are there by the score. They rent all the best houses for thousands of dollars a month, and they pay high salaries—$4000 a month or more sometimes—to skilled East Timorese, stealing the best people from already weak local institutions, and ensuring that any skilled people returning from abroad work for them. They are the international aid industry.

I have never been to East Timor, but if my experience of southern Africa is anything to go by, the paragraph above is probably a reasonable picture. There is no question that East Timor needs help to reconstruct and to establish a functioning country. And there is no doubt that the West has a debt to East Timor after allowing and facilitating its subjugation and destruction during almost 24 years.

But it is also true that the aid industry will set an anti-democratic and elitist pattern in East Timor that will be very hard to break later. Aid is an important investment in ensuring that East Timor follows the path to globalisation and neo-liberalism.

First, consider the anti-democratic aspects of aid. All agencies, from the IMF to the smallest INGO, say they “consult.” But they are under immense pressure to spend money and show results quickly. In Washington and Paris and London and Oxford and Berlin, there are desk officers insisting that the currently fashionable policy - democracy or gender or environment or AIDS - is carried out urgently. In any case, the aid industry has so much experience abroad - the World Bank now bills itself as the “Knowledge Bank” - that it knows much better than local people what is needed.

At the most local level, kindly INGO workers “consult” the local peasants (even though they probably don’t speak the local language).  But the INGO workers have fistfuls of dollars, so the peasants tell them what they want to hear.

The consultants fly in like flocks of migratory birds, stay a few days, pick the brains of local people, and write reports that are a mix of what they wrote in other countries and what previous consultants wrote in East Timor. They “consult” local officials, of course. And the consultants have fistfuls of dollars, so the local officials tell the consultants what they think the consultants want to hear.

And the World Bank and IMF write the economic policy. After more than a decade of structural adjustment programs and extensive experience in post-conflict countries, the policies are already written. Indeed, if Mozambique is anything to go by, they will have conferences in which they fly in everything, including the folders and nametags, from Washington. Nothing is local, but they do “consult.” Senior government officials are probably already on the IMF and World Bank payroll as “consultants,” so they may be paid to consult with themselves, and then tell Bretton Woods institutions what they want to hear.

The IMF’s senior advisor for Asia and the Pacific in December 2000 at the East Timor donor conference stressed the importance of leaving the economy to the market and of “controlling aggregate demand” through “reductions in wages and salaries.” As always, Mr. Luis Valdivieso did not suggest controlling his own demand or cutting his salary, nor that of any IMF consultants. Nor did he suggest consulting East Timorese on whether they considered salary cuts a good idea. But I suspect the donors in Brussels all nodded in agreement, and the consultants on the IMF payroll consulted each other, and agreed this was sensible - so long as their fees were not cut.

And that brings us to the second issue, elitism. The aid industry pays its international staff well, provides the best conditions possible plus regular trips home and to Darwin. Local staff are drawn into the salaries and consumption patterns of this elite. And there is a special attempt to draw in the most educated local people - those with foreign degrees and experience - and to ensure that whether they work for the government or the aid industry, they can maintain an elite lifestyle. This is a style much closer to Sydney or New York than to a typical East Timorese village. It involves satellite TV, good stereos and whiskey, and lots of foreign travel - to ensure that they remain mentally closer to New York than to the family village.

This is the new global elite, which watches the same TV shows and films and wears the same clothes the world over. And it is directly linked to growing divisions between rich and poor. This is not just a growing gap between North and South, but also what is known as “the North in the South” (these elites we have just been discussing) and “the South in the North” (the poorly paid, marginal, unemployed etc.  in the North).

What this means is that most of the East Timorese that representatives of the aid industry meet are part of the same global elite, which speaks the same language and has the same basic values.

Who decides?

Because East Timor does not have its own government, the UN administration and World Bank, along with the highly paid consultants and world “civil servants” from a global elite, make the important decisions that govern people’s lives in the territory. These international decision-makers are joined by an exile community, which, of necessity, has lived abroad and has become part of this global elite.

This is not to say that the global elite is malevolent. Many of its members are old lefties; others are young people who really are committed to ending poverty. But they now assume as normal a lifestyle that only can be maintained, at least in the short term, by widening gaps between rich and poor. An important process of social- and self-justification is also going on. The whole ethos of globalisation is that it is good to be rich and that the rich deserve their wealth; the educated and skilled, as well as those who invest, are more “valuable” to society and so should be paid more. How else can we attract educated exiles back from European universities to a global backwater like East Timor without ensuring that they can maintain the lifestyle they had in Europe - and can send their children to good schools abroad and can fly to Australia for the best medical treatment if they become ill?

The elite’s arguments for paying themselves high salaries and living in dollar ghettos is impeccable. And let me be absolutely clear. I have a flat in London and a mortgage, I earn my living writing about Africa and debt and such issues, and I am paid to do so (although not by La’o Hamutuk). When I work in Maputo, the capital of Mozambique, I am paid an average London wage - not UN rates, but nor do I accept an average Maputo wage. I am part of a global, jet-set elite, and mostly I am paid by the aid industry. Can Mozambique afford me? Does it make sense to pay me the annual income of an average Mozambican every two days?

What happened in Mozambique

Mozambique also experienced a UN and aid invasion, between the peace accord of 1992 and the elections of 1994. An arrogant UN administration took over an entire 10-story hotel in central Maputo, bypassing the government and even local UN staff.

Some of the stories were petty and sick. De-mining was delayed for over a year by a bitter, four-way battle between UN agencies.  Demobilisation was delayed when the United States forced the UN operation in Mozambique to stop using one helicopter firm and hire a different one—one which was linked to the CIA. Italian “peacekeepers” caused a scandal by encouraging child prostitution, while prostitution returned to the streets of Maputo to service the influx of people “helping” Mozambique.

But in the end it was the economic impact that was dramatic. The thousands of UN and aid industry staff effectively dollarised the economy of downtown Maputo and supported a host of new expensive restaurants. Members of the elite were able to rent out their houses for so much money that they could live abroad. (A number of Mozambicans who earned PhDs in the United States were able to fund their education through income gained from renting out their homes in Maputo. This may have been the most useful contribution of the aid invasion.) The IMF had moved in and imposed structural adjustment in 1991 and the economy went into rapid decline. GDP actually fell after the end of the war, when everyone expected it to rise. The IMF even restricted the amount of aid that could be spent, on the grounds that too much reconstruction-related spending would cause inflation.

The IMF also imposed savage cuts in government spending, including a requirement that basic wages of nurses and teachers be below the poverty line. Everyone had to have a second income, which encouraged petty corruption. Corruption was also encouraged by aid agencies anxious to get quick results and willing to pay to bypass Mozambican rules and “bureaucracy.” High aid agency wages and starvation wages in the civil service caused a rapid shift of key staff. One of the most senior officials in the port of Maputo became a UN logistics officer; senior officials in several government ministries became secretaries in the UN or INGOs. Of course, as government became decapacitated and impoverished, the aid industry complained bitterly about government incompetence and corruption.

The aid industry began to realise that these policies were counterproductive to its own interests. The World Bank, for example, could not disperse its loans because most of its counterparts in government were being hired away by the aid industry. The next step was for the World Bank to pay government staff to stay in post - they were told to stay and do the same job (for salaries up to 50 times higher than people at neighbouring desks) and reminded they now worked for the Bank and not the government.

Even this proved inefficient, and in 1995 the aid industry finally forced the IMF to back off. More aid could be spent on reconstruction, and civil service salaries were allowed to rise (so long as rises were greater for the higher paid and smaller for the lower paid). This did stimulate the economy, and from 1996 there has been rapid growth.

But recent data published in the UNDP’s Mozambique Human Development Report 1999 shows what everyone has seen on the ground - the growth is entirely in Maputo. The gap between rich and poor is growing very rapidly, both within Maputo and between Maputo and the rest of the country. The global North-South divide and phenomenon of “North in the South” and “South in the North” is being reproduced inside Mozambique.

Eight years after the end of the war, deep poverty remains in much of the country; the only post-war economic boom was brought by good weather and an end to the fighting. Thousands of rural shops remain closed, factories which reopened after the war are closing again. But in Maputo, there is a boom. Hundreds of huge houses are under construction; major new office and hotel blocks are being built.  Maputo now has cable television, even though people in remote rural areas still cannot afford radio batteries.

This, in turn, has created an environment in which the elites have virtually lost touch with the rest of the country. The university now largely sees itself as a place of privilege in which individuals with foreign Ph.D.s often expect to be rewarded with cars and consultancies. People are paid $100 or $200 a day just to attend aid-industry sponsored seminars. There is little time left to work with community groups or do the research that might question economic policy. The trade unions cannot find any help from trained economists, because they are now so accustomed to earning $400 a day or more as consultants that they will not work for the tiny amount that trade unions can pay.

There are a handful of people, mostly old lefties who still believe the development rhetoric of the 1970s, who are trying to find another way. But they were given a harsh warning on 22 November 2000 when Carlos Cardoso, the crusading editor of the business daily Metical, was very publicly assassinated on a Maputo street. It is no longer safe to challenge the increasing web of corruption and privilege.

But for the IMF, the World Bank, the interlocking global elite of Maputo, and the aid industry, Mozambique is the success story of Africa.

And for East Timor?

No two countries follow the same path, and there are many differences between East Timor and Mozambique. Size is probably most important; Dili will not become another Maputo. But it could easily develop into a wealthy island, which is home to elites who go to Darwin more regularly than they go to the countryside.

In this environment, is an alternative possible? Timor Gap oil revenues will give East Timor a kind of economic flexibility that many other countries do not have. It would be possible, for example, to subsidise peasant agriculture - with improved agricultural extension and marketing systems and a revitalisation of the coffee industry.  With long-term subsidies, it might also be possible to build up other industries - perhaps fishing, eco-tourism, and/or specialty crops. Yet this would go totally against the free-market globalisation ideology of the new elites, in part because it would require a transfer of resources from rich to poor.

But who would develop alternatives, and how would it be done? The most serious problem is that most of the skilled and experienced people who might develop an alternative are already part of an aid industry elite; they will be too expensive to hire and they have a genuine belief that their privileged position is justified and must be maintained. They are no longer able to think “out of the box” of the received wisdom of globalisation.

The second problem is, how might one go about developing an alternative plan? Here Mozambique has a success that might provide some indication of a way forward. The four-year debate over a new land law and regulations proved to be a model of democratic debate and law formulation. The issue came to a head because of U.S. and World Bank pressure for the privatisation of land, in place of the present system in which land cannot be sold or mortgaged and thus people cannot be made landless. The process had the support of a few key political figures and one key civil servant. A commission was established which included not just civil servants, but also representatives of peasant associations.

Some resources were available from INGOs opposed to U.S. policies, but the main need was for time, rather than money. Uniquely, the process was not rushed and was not run according to donor deadlines. There were a series of meetings all over the country. Several drafts of a land law were prepared, and each one went out to workshops where it was debated. There were articles in the press, and even well attended parliamentary committee hearings. A strong land campaign developed to protect peasant rights. Sympathetic lawyers developed imaginative solutions to problems that arose. The final law is a good compromise, ensuring peasant land rights while allowing new development and giving political elites enough remaining power over land allocation to keep their support.

It would be possible to create an alternative development strategy for East Timor in such an open way. But it would require:

* TIME. This needs to be an open-ended process which starts from people’s needs, and that allows for discussions to continue as long as necessary to build a consensus.

* SUPPORTIVE EXPERTS. There must be a few independent economists and other technicians who are not so tied into the aid industry that they cannot think outside the accepted paradigms. There are technical problems—ranging from financial flows and availability of Timor Gap money, to world markets for coffee and tourism—that must be resolved and explained to local people. But the starting point of these experts cannot be that standard IMF and donor line. There must be room for alternative solutions.

* POLITICAL COMMITMENT. There must be genuine political support by at least a few key people in the new government and civil service. They need to understand that the process will be slow, they will need to make information available, and they will need to resist pressure from both local groups and the aid industry for quick results. Most importantly, they will need to resist the immense pressure from the World Bank, IMF, and donors to take decisions which will pre-empt the outcome of the consultative process.

Sadly, although such an alternative development strategy is possible, it is probably unlikely—especially since East Timor’s first post-occupation government is the international aid industry. This does not mean that independent political organizing is futile, only that it is all the more necessary.


Dr. Joseph Hanlon has done extensive research on development and its impact in Mozambique. He is the author of numerous books on southern Africa. The views expressed are the author’s and not necessarily those of La’o Hamutuk.

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:  Homepage:
Boletim La’o Hamutuk: [Tetum PDF format]
Vol. 1, No. 4, 31 Dejembru 2000 Banku Mundial iha Timor Loro Sa’e:
Vol. 1, No. 3, 17 Novembro 2000 Hari Sistema Saude Nasional iha Timor Lorosa’e:
Vol. 1, No. 2, 17 Julho 2000 Protesaun ba meio ambiente iha TL:
Vol. 1, No. 1, 21 Juñu 2000 Rekonciliasaun:

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:  Homepage:
La’o Hamutuk Bulletin:
Mar 23 2001 LH: Job announcement for La'o Hamutuk in East Timor:
Activity Report: Mar 16 2001 LH:

See also:

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

BD: Reconstruction and 'Aid & Development' - A collection of recent press releases, reports, and articles

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

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