East Timor Observatory

Subject: Employment and unemployment one year after international intervention

Unemployment - still at around 80% - continues to be a major concern, especially in East Timor's cities. The situation has become highly sensitive in Dili, where society is clearly two-tier, divided by very different ways and standards of living. A year after UNTAET's arrival, most permanent jobs are to be found in the civil service, in spite of the fact that the number of civil servants in the new administration is to be far less than the number previously employed in the Indonesian administration in East Timor. The cutback has been justified by the need to create a sustainable state apparatus.

As many temporary and/or intensive work programmes end or are being slimmed down, the private sector becomes increasingly vital as a means of generating employment. So far, however, the private enterprise has only created about 1,000 jobs. While foreign investment is also indispensable, it should not be accepted at any price: "..this is not the Far West..", warned the UN transitional administrator. It is important, therefore, that laws governing property, the records for which have been destroyed, are put in place
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Background:

The devastated state in which East Timor was left last year called for rapid and strong international intervention. Employment creation programmes were developed to provide immediate responses to the needs of the Timorese. However, the slow workings of the administrative machine combined with delays in both the arrival of funding and the establishment of mechanisms that ensure local participation, have caused the entire social reconstruction process to get off to a late start. The situation at the moment does not appear to be dissimilar to that of a few months ago (see EMP01).   top

The facts:

1. employment

According to the East Timor Transitional Administration (ETTA) web page, approximately 24,000 Timorese were employed as of 28 April 2000. Of this number, approximately 94% were working for specialist UN Agencies; 68% were working in temporary employment and/or job rotation schemes (TEPs, QIPs and UNICEF); 22% were employed in the civil service, while 4% were employed by UNTAET. The remaining 6% were distributed between NGOs (4%) and the private sector (2%) (ETTA web page). Although these figures are now outdated, their relative distribution is not likely to have altered significantly. Urban areas are the worst hit: "4 out of every 5 working-age people in the cities are jobless" (Asiaweek, 5-5-2000); "…about 80%" (Reuters, 5-5-2000).    top

2. public administration and services

ETTA's definition of its overall strategy for the new civil service was: "…to keep staffing levels small but adequate, to move towards payment of competitive salaries and wages and to create a motivating work environment through non-monetary incentives" (ETTA web page).

a) public employment

• The number of public civil servants to be hired has been set at about 12,200, - only 36% of the number employed in the Indonesian civil service. It is hoped that by the end of the year, around 7,000 jobs will have been created in the new civil service (Sérgio V. de Mello, 8-5). Most of these jobs will be for teachers, health workers and police officers.  The limit was fixed on the basis of the country's size and resources: "UNTAET knows it can only establish the basic services that East Timor will then be able to maintain. (…) we cannot build what the East Timorese cannot then afford to run", said one Australian official (The Australian, 26-6).
• Although more than 25,000 East Timorese were employed by the civil service in the last years of Jakarta's administration, all decision-making was in the hands of Indonesian officials and most Timorese jobs were of the kind that gave them little or no administrative experience (The Australian, 26-6-2000)
• Andrew Whitley [head of UNTAET's civil service] decided to advertise civil service vacancies among the Timorese living in Indonesia, and to accept applications from anyone who had not been formally accused of a major crime (Foreign Affairs, 24-6-2000).
• In the 1st phase of a UNTAET campaign to register Timorese who were civil servants in the former Indonesian administration in East Timor, 17,500 people had been registered by early October. The aim of the initiative is to provide the concrete data needed for the negotiations on payment of pensions owed by Indonesia to its former civil servants (UNTAET, 6-10-2000).
• On 2 August, the first Timorese permanent civil servant in the new East Timorese administration was recruited. Since then, 49% of civil service vacancies for Timorese have been filled. By November, the number of Timorese appointed as civil servants was 5,969 (UNTAET, 17-11). The apparent increase in the figure given on ETTA's web page for civil servants (3,997) is due to the incorporation of some of the teachers who were being paid, temporarily, by UNICEF (6,862). The total figure represents, in real terms, a considerable reduction in job numbers in this sector (from 10,859 to 5,969). Meanwhile, 273 of the 500 security guards hired by UNTAET 6 months earlier were laid off (UNTAET, 24-10-2000).

• The Civil Service Campus, in Comoro, Dili, which was opened on 8 May, houses the Public Service Commission, the HR Development Centre, Central Recruitment Office and the Civil Service Academy. The Academy provides trainer training courses in languages, management and vocational skills programmes, as well as job skill courses (including language, office admin/management, computing and IT) for young unemployed people seeking to enhance their employability. By the end of 2000, an estimated 600 people will have completed the Academy programme (ETTA web page).
• The Public Service Commission substituted 3 of its members, and is currently composed of 6 Timorese and 1 foreigner. Its mission is to establish the policies, procedures and guidelines for the new East Timor Administration [for further information see EMP01 and GOV01].
• The first employment centre opened in Dili in late August. Its primary task will be to identify job vacancies in the district and find suitable candidates for them, as well as providing information about training courses (UNTAET, 22-8-2000).

3. pay and working conditions

• A temporary pay scale [setting rates of between about US$77 to 318 per month for unskilled to senior administrator categories respectively] has been established, as well as working hours and overtime conditions. The pay scale and working conditions only apply to those working for ETTA (ETTA web p. & UNTAET, 5-5).
• No minimum pay scale or employment conditions have been established, or are expected to be, for Timorese employed by UNTAET, UN agencies, NGOs or private sector. UNTAET has only recommended a maximum daily wage of US$ 5- 6 for an unskilled Timorese worker, and pays US$6-US$7.5 to Timorese working in the road cleaning programmes (Green Left Weekly, 3-5-2000); the Australian owner of the "Hello Mister" supermarket pays his employees 20,000 rupiahs [about US$4], but pays performance-linked supplements (Australian Financial Review, 29.8.2000). "A Timorese labourer's daily wage of $6 per day [6 Australian dollars, i.e. US$ 3.5] now buys 2 cappuccinos" (St. Petersburg Times, 16-6-2000).
• The presence of international workers earning high salaries has driven up prices and, thus, inflation. Frustration, already rife because of the high hopes the Timorese had for this first year of "independence", has been exacerbated by the emergence of a deep divide: "the influx of foreigners has in effect created two societies - one poor and jobless, the other rich and employed" (Los Angeles Times, David Lamb, 22-6-2000). For some Timorese, foreign presence is regarded as "a second invasion" (ABC/BBC, 7-5-2000), giving rise to social demands and frequent strike action.
• While the demands are legitimate and based on objective motives - imported inflation has badly hit Timorese living standards - they also have a subjective element - the desire for their earnings to match those of the foreign workers. If this were to happen, however, the consequences in terms of stability could be dire, both now and in future, for Timorese society. A flagrant example of this was the demand by the new Timorese judges for their salaries to increase from US$361 to US$3,000 per month (UNTAET, 10-10-2000).

• UNTAET justifies the containment of salaries on grounds that the future Timorese government will need a sustainable public sector (UNTAET, 10-10-2000) and, more generally, on grounds that the Timorese are lacking in competences. The considerable emphasis placed on computing and English language skills [which most Timorese do not have] reflects negatively on the assessment of other qualifications. No one seems to question the priority given to language and IT courses in the recently formed Civil Service Academy (ETTA web page & UNTAET, 8-5-2000) to the detriment of teaching more basic skills. Strangely enough, the sustainability argument, so often used in matters of finance, is forgotten in many other questions.

4. programs and other funding

a) Quick Impact Projects (QIPs)

Finance for these projects is available from 3 funds: UNTAET (US$ 1 million), OCHOA (US$ 150,000), and UNHCR (US$ 200,000), distributed equitably throughout the 13 districts. Projects are presented by (national or international) organisations or groups of individuals, and have a dual aim: public infrastructures rehabilitation, and immediate income generation (mostly in the form of short-term employment) for people in need, or providing people with the basic tools with which to recommence their economic activity. Projects also aim at community capacity-building and empowerment. Building roads, water supply networks, health care units, etc. are among the QIPs already carried out, while others have focused on areas such as supporting the manufacture of "tais" (traditional Timorese woven fabric), and supplying tools for agriculture. QIPs were able to respond to immediate needs, in contrast to other, slower reconstruction programmes. The main obstacle, however, lies in the shortage of organisations and groups capable of implementing projects in the sub-districts. Their continuation in 2001 is not certain (UNTAET 25/26-20-2000).

b) Transitional Employment Programme (TEP)

The main focus of the TEP, which is financed by USAID with over US$13 million, is youth employment in schemes that not only are of benefit the community but also provide young people with a sense of participation in the rebuilding of their country, as well as confidence in community leaders and in UNTAET. Projects are designed and implemented jointly with District Administrators, local representatives and NGOs (ETTA, web page).
By October, 50,000 people had been employed, temporarily and in rotation, in road clearance, drainage system maintenance, repair of markets, sports facilities, schools, and community building restoration work. TEPS-II (Transitional Engagement for Population Support), launched in September, is oriented more towards community development (USAID, 3-10-2000).

c) East Timor Community Assistance Scheme (ETCAS)

Financed by AusAID (Aus.$ 800,000), is a programme that supports training initiatives in woodwork, fishing, mulberry plantation for local silk production, and human rights education. These initiatives have provided jobs and improved livelihoods for an estimated 1,200 people (AusAID, 31-8-2000).

d) Dili Community Employment Generation Project

When this joint World Bank - UNDP project, with a total funding of US$ 499,000 for 5 months, ceases in December, it will have provided an average of 20 days employment in cleaning up work for about 5,000 of Dili district's poorest people (World Bank TFET).

e) Community Empowerment and Local Governance Project (CEP)

The UN Trust Fund is financing the CEP with a total of US$ 22.5 m. over 2 ½ years [the 1st tranche is US$ 7 m.]. The programme's aim is to create transparent, participatory and accountable local Timorese governance structures. In the beginning, democratically selected councils would be a way for communities to rehabilitate basic economic infrastructure and restart economic activities. By early November, 408 village councils and 57 sub-districts (6,270 council members) had been elected. Threats to security disrupted council elections in 3 sub-districts in Suai, close to the border.
So far, 619 projects have been approved: meeting halls (43%), feeder roads and farming infrastructure (25%), productive equipment restoration (15%), repair of water supply (10%), schools and clinics (7%).
Representatives from USAID, AusAID, World Bank and the Asian Development Bank, conducted field visits to assesses gender and social inclusion, information and communication at community level, formation and role of village development councils and NGOs, the impact on markets and rural economies of community development schemes to date. The projects assessed included the TEPs, ETCAS, CEP and Dili CEGP (WB TFET, 6-10-2000).

f) Return of Qualified Nationals Programme (RQN)

Set up by the IOM (Internat. Organisation for Migration) to strengthen technical skills in the public and private sectors by securing the return of 300 specialised Timorese, the programme was far from achieving its goal. In May, the IOM had received a total of 21 job offers from the Civil Service and Public Administration office. In October, the IOM advertised 84 vacancies in Timor, but failed to mention how many returns the programme had secured.

g) bilateral and multilateral programmes

Norway, the UK, Japan, Australia and Portugal finance other job creation programmes, mostly in the area of road repair work (UNTAET, 5-7-2000).

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5. private sector

a) Small Enterprise Project (SEP)

The SEP was created within the framework of the UN Trust Fund with a budget of US$ 10 million for a 2-year period. The first stage, with an initial grant of US$4,850 for 2000, seeks to provide small loans for enterprises [US$4 million], and provide a grant [US$850,000] to support the land and Property Department. The loans, which range from $500 to $50,000 for each approved project, are repayable in 36 months; the interest charged is 10% per year. As of end of June, the project had received US$30 million in applications - 7 ½ times the amount available, which Sérgio V. de Mello regarded as a sign that the Timorese were interested in creating small enterprises. Of the 2,100 loan applications, many were rejected because of non-viable business plans. This, combined with the slow processing of the large volume of applications, led to some social unrest. The US$307,000, available for each of the 13 districts, was quickly exhausted in Dili.

However, in the remaining 12 districts, on average only about one third of the funds had been disbursed in approved loans. The loans support the establishment of enterprises in sectors like transportation, retail, mechanical agriculture, restaurants, carpentry, bakery, tailoring, brick manufacturing, fishery, photocopying and cattle trade. The average size of the 190 loans approved in the first phase was approx. US$10,000, which will create 900 new jobs - higher than the 700 jobs originally forecasted. 17% of the approved loans (totalling US$2,691 million) were allocated to projects presented by women (WB TFET).

b) Microfinance Development Program

Approved in September by the Asian Development Bank (ADB), with a budget of US$7.8 million from TFET, the program is to be implemented by UNTAET as of December. The overall aim is to strengthen and facilitate capacity building in the poorest communities by providing of means finance and training for entrepreneurship. The project's main components are: rural finance for
microenterprise activities; institutional building/strengthening (rehabilitating at between 20 and 24 credit unions), supporting the sign-up of 6,000 members within one year of implementation, and the creation of a microfinance bank, and project management (ADB, 22-9-2000; WB TFET, 9-11-2000).

c) Business opportunities & foreign investment

Only 10% of the 1,048 businesses registered (in early May?) with UNTAET were really functioning. About 90% of the registrations were for kiosks and shops selling basic needs goods. Most businesses were waiting for loan approval so they could become operational (ETTA web page). By the end of July, 2,977 private businesses had been registered, the most visible ones belonging to foreigners, mainly Australians. Their hotels, restaurants, supermarkets, provide the UN peace-keeping missions and foreign aid workers with goods and prices beyond the reach of the local population: "East Timor's economy resembles the Wild West as small-time foreign business people try to make quick profits" (St. Petersburg Times, 16-6-2000). As foreign investment was identified by UNTAET as a key area that will contribute towards the territory's development, it has set up an Investment Promotion Unit, in order to "provide a coordinated response to investment proposals, to develop an investment policy and to promote East Timor as an investment destination" (Investment News no 1, 8-7-2000).

However, Jean-Christian Cady, Deputy SRSG, reported that two obstacles persisted: "…private foreign investment would come to East Timor when two criteria were met - public security and security of land tenure. He stressed that public security had been basically achieved, but that land tenure remained a challenge" (UNTAET Department of Public Information, 24-5-2000).

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Conclusion:

• The qualifications of job applicants, especially those of applicants to the civil service, ought to be adjusted to match the local reality, rather than have to adhere to an imported, out of touch framework. In this respect, ever since UNTAET'S arrival, English language skills have become a priority requirement for the UN administration - not for East Timor. Having said that, the deficit in terms of technical skills is clearly a vast. The answer lies in training and in gaining experience, and in acknowledging and accepting that this process will take time. The establishment of the Civil Service Academy for executive training, and well as the appointment Timorese staff at different decision-making levels are steps that need to be taken actually before the date of independence.
• The deep disparities between salaries paid to Timorese and foreigners is a cause for concern. The number of foreign officials should be restricted as soon as possible, and they should take on the role of trainers and advisers, rather than be substituting the Timorese.
• The temporary work programs were solutions resorted to in an exceptional situation. Even if they could or ought to be prolonged - because the situation is still exceptional - the real key to combating generalised unemployment lies in the private sector - in the population's own capacity to create the foundations of its productive apparatus oriented towards the territory and the population in their current phase. The different forms of financing, particularly microfinance, seem the most appropriate at this stage. Given East Timor's history, the large number of projects submitted is evidence that the Timorese themselves are motivated and determined to be the ones to rebuild and energise the territory's development.
• Whenever issues connected with employment, as well as other areas, are being considered, the fact that 80 to 90% of the Timorese population is involved in agricultural work and directly depends upon it, should always be taken into account.