The La'o Hamutuk Bulletin
Vol. 4, No. 5: November 2003
In 1999 more than 250,000 East Timorese were deported or fled to West Timor, where most of them stayed in the refugee camps in Belu and Kupang Districts. Since then most of the refugees have returned to East Timor, but according to the United Nations High Commissioner for Refugees (UNHCR) and Indonesian government figures, there are still around 28,000 in the camps in West Timor.
On 31 December 2002, UNHCR terminated refugee status for these people, which means that East Timorese remaining in West Timor are no longer regarded as refugees under international law, and therefore they no longer have the international protection afforded by refugee status. However, the international community is still responsible for the refugee problem and should help to find proper solutions for the tens of thousands of people remaining in the camps. This article reports on the current situation of the refugees based on an investigation by La’o Hamutuk in July and August 2003, including field work in West Timor.
From 1999 to 2003 UNHCR and IOM (International Organization for Migration) have assisted with the repatriation of refugees to East Timor, facilitating transport from all parts of Indonesia. If the refugees return to East Timor by vehicle, ship, or airplane, IOM and UNHCR provide transportation to their places of origin. Most of the refugee returns to East Timor were organized by UNHCR, however some refugees returned on their own initiative, without support from UNHCR or IOM (see Table 1).
Table 1: Returnees 1999-2003
Voluntarily/spontaneously or organized by UNHCR
In 2003, refugee returns have been significantly low. For the first four months of the year there was no clear repatriation procedure and no funds allocated by the central government of Indonesia for administrative and operational costs of the East Nusa Tenggara (NTT) government’s Refugee Coordination Unit (Satkorlak). This made it difficult for refugees wanting to return to East Timor. In May IOM and Satkorlak agreed to keep assisting the refugees willing to return. IOM assists with transport, administrative and operational costs for NTT government district level refugee coordination unit (Satlak PBP).
In facilitating returns, IOM, in collaboration with NTT’s Refugee Coordination Unit and Jesuit Refugee Services (JRS), visited refugee camps to inform the refugees and registered those who were willing to return to East Timor (either JRS visits the camps or the refugees come to JRS Office to register). Administration costs such as forms and photos for the refugees were funded by IOM.
Satlak also organizes transport and informs IOM in East Timor of refugees intending to return, including the number of families returning to East Timor, their date of return and places of origin. On the scheduled arrival dates, IOM waits at the border with transport to pick up the refugees, and also pays transportation costs for the journey from their camps to the border.
At the border, IOM, UNHCR and CAVR (East Timor’s Commission for Reception, Truth and Reconciliation) welcome and interview the returning refugees to assure protection in case the returnees have any problems during their reintegration into their communities. Returnees expected to have problems are secured in safe houses. Then IOM, UNHCR, CAVR and the Human Rights Unit of UNMISET begin dialogues with local communities and their leaders about the return of the refugees.
Those without problems are brought directly to their community in East Timor. According to a UNHCR source, the agency monitors the reintegration of the returnees into their home communities, although La’o Hamutuk’s
Table 2: Returnees in 2003 (after UNHCR terminated refugee status)
UNHCR and IOM have funds especially allocated for refugees. La’o Hamutuk
After the murder of three UNHCR international staff in Atambua in 2000, UNHCR’s East Timor mission withdrew its entire staff from West Timor. Since then they have only been providing assistance for refugees that return to East Timor, including facilitating transport as mentioned above, and basic materials upon return to East Timor such as food, kitchen utensils and tarps. This has also included UNHCR’s Shelter Program for the rebuilding of 35,000 houses for returnees and for vulnerable persons in local communities, which ended in 2001 (see LH Bulletins Vol. 3, No.1 and Vol. 1, No. 2).
UNHCR budget for repatriation and reintegration of returnees and
The term “displaced persons” refers to East Timorese who never left East Timor but were forced to leave their villages due to the fighting in late 1999.
Condition of the refugees in West Timor
In 1999 there were approximately 175 refugee camps, and today there are still around 145. In Kupang District there are only three, but each camp contains many refugees: Tuapukan alone has 7,000.
After the murder of three UNHCR international staff and a number of East and West Timorese in Atambua in 2000, virtually all international staff of all humanitarian agencies were evacuated from West Timor and aid to the refugees reduced. However, some international organizations continue modest work with the refugees including CRS, CWS, JRS, UNICEF, WHO, Oxfam GB, and CARE, using Indonesian staff and NGOs. There have been significant security obstacles for these international organizations and the UN to keep monitoring and providing assistance to the refugees. In 2000, West Timor was classified by the UN as one of the most dangerous places on earth, and international staff are generally prohibited from traveling there. Although the security situation has improved since then, Indonesia has yet to provide adequate justice in the case and the UN has not changed the classification of the region, which also discourages other organizations from working in the area.
In early 2000, long before UNHCR ended refugee status, the government of Indonesia stopped assistance to the refugees as a strategy to move them from the camps. According to a workshop in Yogyakarta on refugees funded by Bakornas PBP and UN-OCHA, the Indonesian Government will end its sector refugees fund in 2004. Remaining government assistance is not specifically for the refugees, but is part of NTT province and local government’s poverty reduction programs for the NTT general population. It means the Indonesian government assumes the refugees are part of poor communities in NTT, not those forcibly moved from their places of origin to save their lives because of conflict or government policy.
The number of refugees in the camps in West Timor is slowly decreasing. The refugees are slowly developing relations with local communities. New camps have also been built for active and retired members of the Indonesian armed forces who served in East Timor. Removing these elements from civilian refugees has helped decrease the intimidation in the camps. All these factors have helped to improve the situation of the refugees. But it does not mean that all the problems are over, and the refugees are far from living easy lives. Virtually all assistance from the international community and the government of Indonesia has long ceased. Besides reports from NGOs with limited resources, there is no recent reliable data on the humanitarian situation of the remaining refugees.
A West Timor NGO survey, coordinated by Oxfam GB and CIS Timor (Volunteer Center for Internally Displaced People Services in Timor) in November 2002, revealed that the food and nutrition situation was worrying in almost all of the camps (the refugees ate less than three times a day), water and sanitation was inadequate (some camps lack access to potable water), and there were frequent health crises, especially among children due to lack of basic health services.
NTT province has very limited resources for public services, and many locals resent the further strains put on the local budget by the refugees’ needs. At times there are discriminatory policies which keep refugees from using public services such as primary schools, government health care and social safety net programs such as subsidized rice. Former refugees already settled in local communities are also often excluded from services by the local government.
In several camps and resettlement areas, land disputes are common between the refugees and local communities. When the refugees were deported to West Timor in 1999, the government assured local people that the refugees would only use their lands temporarily. In several places local people have demanded that the refugees return to East Timor. This tension is exacerbated by competition between the refugees and local people for public services and limited natural resources (for example, clean water). The tension will continue to escalate if the land issues are not addressed.
The government of Indonesia, with assistance from the Japanese government, the European Union and UNHCR, launched a program to resettle refugees who do not want to return to East Timor in Indonesia. This program is supervised by the Ministry of Labor and Transmigration and the local government’s Resettlement Department. There is also a resettlement program from the Department of Social Services and the Indonesian military (TNI). And unlike regular transmigration programs, all resettlement programs are within NTT province. Since 2000 the majority of resettlement sites have been In West Timor. However, in the more recent period of 2002-2003, UNHCR-funded programs have only built resettlement sites on other islands in NTT province, such as Sumba, Flores and Alor. According to an Oxfam GB survey, only 13% of the refugees wish to be settled outside West Timor. This is understandable as they might want to return to East Timor in the future, and it makes it easier to contact relatives in East Timor. Resettlement areas in West Timor were quickly filled but there is hesitancy to move to other camps off the island. Reallocation programs coordinated by UNHCR/UNDP outside West Timor, particularly in West Sumba, were having problems finding people. Of 550 families planned to resettle on the island, so far only 15-20 have done so.
In addition, the government of Indonesia is slow in building new resettlement areas. In the past year, only around 200 houses have been built due to the difficulty in finding land inside West Timor. The housing situation in new resettlement areas is very worrisome where houses are small, bad quality and easily damaged. The Indonesian Government needs to give serious attention to implementing funds from the Japanese Government and UNHCR. Officials from four districts in West Timor had expressed their reluctance to have the refugees settled in their areas, as East Timorese refugees have been there for four years and have already caused some problems for local people. The government of Indonesia has only allocated 40% of houses in new resettlement areas for former East Timorese refugees, reserving the rest for the local population and transmigrants from other areas in Indonesia. Sometimes conflict arises between local people and East Timorese, yet the government has not taken significant measures to avoid this. Given this situation, sometimes locals have occupied resettlement areas that were specifically built for former refugees. There are several cases where the local community has occupied whole houses in new resettlement areas. However some local communities allow refugees to use their land (for instance, in Kereana Village, near Betun, the community allows their land to be occupied by refugees from Sukabitetek camps). It depends on how local government talks to the local community about the situation. If the government continues to be so slow to settle the issue, it will take at least 10 years to reallocate all East Timorese who want to be Indonesian citizens.
Since the implementation of the cessation clause by UNHCR on 31 December 2002, East Timorese remaining in Indonesia are faced with four options:
According to a West Timorese NGO survey conducted from November 2002 to January 2003, about half of the refugees want to return to East Timor. Yet they worry about security in East Timor, their assets abandoned in East Timor, employment issues and so forth. Fifty percent of the refugees considered returning to East Timor in the coming two years. Other reasons they have not returned are dependency on salaries from the government of Indonesia (civil servants, TNI, police, and pensioners including widows) and fear of prosecution or retaliation for involvement in the 1999 atrocities.
The government of Indonesia has also issued a decision of the People’s Assembly (TAP MPR No. VI/MPR/1999) and presidential decree on the citizenship status of the East Timorese remaining in Indonesia. The decree, issued in May 2003, offered the population of East Timor (the former Indonesian “province”) including the refugees to:
This presidential decree obliges the former population of East Timor (including those who are not originally from East Timor) to take part in the registration process that ended on 30 September 2003. The decree does not explain further consequences of the two options. For those who do not register by the deadline the consequences are not clear.
The refugees who want to be East Timorese citizens but remain in Indonesia are given a special temporary residency permit valid for one year. It is expected that at some point in time they will have to provide legal documents, such as a passport, to prove East Timorese citizenship, and obtain a regular residency visa through procedures applicable to any foreign citizen. However, no clear process has been publicized by the East Timorese government for refugees to get proof of East Timorese citizenship without first returning to East Timor. It is doubted whether refugees who choose East Timorese citizenship will be able to fulfill the administration requirements without help from the East Timor Government. But if the refugees are legal subjects of East Timor, the East Timor Government is obligated to support them.
Almost all the refugees are entitled to East Timorese citizenship. Yet East Timor’s Nationality Law requires documents such as a birth certificate to prove anyone’s place of origin, and many of the refugees have never had or lost such documents, especially during the chaos of 1999. Moreover, given the limited time available for registration and lack of funds allocated by the Indonesian government to socialize the process, it is doubtful whether refugees can make informed decisions about their future status.
Many of the refugees are still unaware of the importance of citizenship and its consequences, which is often viewed as merely a set of nationalist feelings with no legal consequences. This was worsened by the lack of information provided to the refugees on the current citizenship process and the implications under East Timorese and Indonesian law. Without this awareness, some refugees were probably unable to decide on citizenship correctly, did not register or missed the deadline. This could possibly leave them stateless, with little or no legal rights in Indonesia.
UNHCR terminated refugee status due to increasing stability in East Timor. Since East Timor has a newly established government, which can protect its citizens and provide a stable and secure situation, the reasons why the refugees fled their homeland no longer exist. So UNHCR, The East Timorese and Indonesian governments expect East Timorese refugees still living in West Timor to decide to return to their homeland or live permanently in Indonesia. However it does not mean that UNHCR can simply wash their hands of these issues. UNHCR has to keep supporting the refugees until a lasting solution is found.
Humanitarian assistance for the refugees has to be resumed since many of the refugees may still decide to return. And in order to help the refugees make informed and voluntary decisions there should be an independent and balanced socialization of the options available to them.
Only the government of East Timor can determine who is an East Timorese citizen, so the government of Indonesia must work in close cooperation with the government of East Timor regarding citizenship issues. It is especially important to provide balanced information to help the refugees decide their future citizenship. This can include making provisions for the absence of legal documents. The government of Indonesia should apply a mechanism to enable refugees to register after the 30 September deadline, since many refugees did not understand the importance of their citizenship status.
The government of East Timor should monitor the returnees to ensure their security and help them to integrate with the community, providing them with services to fulfill their basic needs. That way, the refugees will see that the East Timorese government gives them attention.
The government of Indonesia has to make better use of the limited donor funds available for resettlement programs. All discriminatory policies imposed upon the East Timorese choosing to remain in refugee camps, local resettlement areas or elsewhere in Indonesia must end immediately. Indonesian local government must treat newly settled East Timorese and local people equally as an integrated society, including the refugees in the social safety net, poverty reduction and other related programs if these East Timorese people are to be considered full citizens of Indonesia.
Workshop on Gender and Poverty Reduction
The World Bank’s Second Regional Workshop on Gender and Poverty Reduction Strategies was held in Siem Reap, Cambodia, from September 17-18, 2003.
The Timor Leste delegation to Siem Reap included Adelina dos Reis Caldeira Noronha, Directorate Assistant for Yearly Childhood Education, Ministry of Education; Maria Jose Sanches, Deputy of the Office of Gender Promotion and Equality; Ivonia da Costa Goncalves, Secretary to the Vice Minister of Agriculture; Odete da Silva Viegas Araújo, Ministry of Health; Judit Dias Ximenes, Member of Parliament; Maria Manuela Leong Pereira, Fokupers; Keryn Clark, Oxfam Australia, and Tomas Freitas, La’o Hamutuk
The Timor-Leste delegation presented their paper on monitoring implementation of poverty reduction strategies in Timor-Leste. Tomas Freitas from La’o Hamutuk then discussed experiences of monitoring three poverty reduction strategies in East Timor: TFET, TSP, and the National Development Plan. In monitoring the Trust Fund for East Timor (TFET), the ADB and World Bank used project-based monitoring of infrastructure reconstruction, agriculture, health and education projects. There was little involvement by government or civil society and poor gender analysis, with few gender indicators or recommendations on gender programs and policies.
Budgetary support to the Government of RDTL, as described in the National Development Plan (NDP), is managed by the World Bank through the Transition Support Program (TSP) (See LH Bulletin Vol. 4, No. 2). Monitoring was carried out through Donor Assessment Missions, which took input from of Government but not from civil society. A system for monitoring the NDP is currently being developed - government and civil society are in dialogue, and the international community has been invited as observers. Civil society groups have also been involved in monitoring the programs of donors, international financial institutions, the UN and the government. Earlier this year, NGOs in cooperation with the Ministry of Planning and Finance also conducted independent monitoring of the World Bank’s Community Empowerment Program.
On 25-30 of August, HASATIL (Hametin Sustenavel Agrikultura Timor Lorosa’e), a network of local organizations and farmers’ groups working for the development of sustainable agriculture in East Timor, together with other local and international NGOs, held the Second Expo-Popular at Borja da Costa Park, Farol, Dili. The Expo-Popular tries to increase East Timorese awareness about local agriculture products, and to build co-operation among government, business, farmers and the society. It also works for alternative agriculture oriented to the interests of small local farmers.
In addition to exhibiting local East Timorese agriculture products, the Expo held several discussions involving small farmers, businessmen and the government, based on the principle that the entire development process, especially agriculture, is the responsibility of all East Timorese. One of Expo’s achievements was an agreement between HASATIL and the CCTL (East Timor Chamber of Commerce). The agreement has the following five points:
On 1 October, nine East Timorese popular educators from different local NGOs went to Cuba to participate in a three-week intercambio (exchange) about popular education in health, agriculture and community issues. In Cuba, the group was hosted by the Martin Luther King Center, an NGO with wide experience in popular education and community organizing. Their program included seminars and discussions about Cuba’s history and its experience with popular education, as well as visits to several popular cooperatives and community projects where popular education is used to develop alternatives for health, agriculture and economic development. The group included representatives of La’o Hamutuk, Sa’he Institute for Liberation, Perkumpulan HAK, Fokupers, Haburas, Men’s Association Against Violence, Naroman Bucoli and Feccu from Viqueque.
Now that they have returned to East Timor, the group will hold two workshops to share the experience acquired during the intercambio with other local activists and NGOs. The East Timor-Cuba exchange was organized by La’o Hamutuk
The Asian Development Bank (ADB) Second Regional Workshop on Good Governance was held in Korolevu, Fiji on the 29-31 August. The participants at the workshop came from Pacific Island States including Fiji, Samoa, Solomon Islands, Vanuatu, Papua New Guinea, Cook Islands, New Zealand, Australia, Tonga, Marshall Islands, Tuvalu, Federated States of Micronesia, Kiribati and East Timor. Some donors were also present, including Ausaid, New Zealand Aid, JICA, Austral Foundation, British High Commission, UNDP, and the ADB. From the NGO and academic community those in attendance were the Forum Secretariat, Foundation for the Peoples of the South Pacific International Pacific Financial Technical Assistance Centre and the University of the South Pacific. The delegation from East Timor consisted of Agostinho Castro from the Budget Office of the Ministry of Planning and Finance, Augusto Soares Barreto, Director of the government’s Capacity Building Coordination Unit and the representative from civil society was Tomas Freitas from La’o Hamutuk.
This workshop, organized by the ADB, aimed to review and analyze good governance programs in the South Pacific Region. This was the first workshop of its kind in the region. A similar workshop was held last year in Manila with participants from Southeast Asia. East Timor attended as observers because the East Timor government has not yet decided to join the South Pacific Forum. The workshop was opened by Robert Y. Siy, Director, Pacific Operations Division of the ADB.
Dr. Qalo: Pacific Governance
The first paper was presented by Dr. Ropate Qalo, head of the School of Social and Economic Development, University of the South Pacific, titled Towards a Uniquely Pacific Governance Model?. This paper discussed several areas important for Fijian society.
Dr Qalo said that the ADB defined governance as having four dimensions: accountability, participation, transparency and predictability. The ADB’s medium term plan ADB Action 2000-2004 put governance at the top of the agenda for Asia Pacific development. This has been criticized by some including the Chinese Government, in terms of the ADB’s stance toward government policies. The Chinese Government said that this terminology is “too political.” The Chinese Government is inclined to choose the term “development management” instead of “good governance” which is promoted by International Financial Institutions (IFIs). The World Bank defines governance as the way power is exercised in the management of a nation in terms of social and economic development, a polite way to raise embarrassing issues such as corruption, incompetence and power imbalances. The idea of good governance comes from the theory and institutions of neo-classical economy, legal corporations, political knowledge and economic sociology.
Dr. Qalo said that the meaning of independence for Fiji was to improve living standards of individual households. He said this was ruined by the macro views of those in authority as they favored larger infrastructure projects. As these projects were mainly based in the urban areas they increased the migration from rural to urban areas. He went on to say that the majority of Fijian households at the micro level cannot live a life of value these days because of the rhetoric of independence remains at the macro level. In Fiji more than 50-60% of the population live below the poverty line. This poverty problem has occurred because of the low income of the lower class, who are not able to pay tax to the state, and also because of the macro-economic conditions that have been forced on them by the IFIs.
Rex Horoi: Regional Technical Assistance Program
Rex Horoi, Executive Director for the Foundation for the Peoples of the South Pacific International (FSPI), presented a paper Government Planning, A Progress Report about the Regional Technical Assistance Program (RETA),
Mr. Horoi stated that Fiji was a test case to analyze problems faced by communities and then link them with government issues, from the perspective of a monitoring model of the local community, to identify traditional or local government forms.
The following are the steps taken by RETA:
The delegation from Papua New Guinea (PNG) focused on combating corruption, because in PNG corruption is a big problem. Almost all components of civil society, including media and NGOs, focus on combating corruption.
Phil Bowen: financial management
Phil Bowen from the Australian Department of Finance and Administration, conveyed his ideas about financial management in the public sector. He said that the push for reform has developed over a long period of time. He went on to outline some reforms that have taken place within the Australian public sector and the effects they had. He said that the key drivers for reform were fiscal consolidation and improved outcomes. He emphasized that the following principles needed to be underlined when discussing public sector financial management:
ADB Country Governance Assessment
The Country Governance Assessment (CGA), is an idea put forward by the ADB in the workshop. There are two objectives contained in the CGA:
Public Administration: There must be an evaluation in regard to constitutional clarity in the separation of powers and an evaluation of the effect of the traditional hierarchical structure. The degree of popular understanding of the electoral system and citizenship rights must also be gauged together with the level of parliamentary negligence. Weaknesses in government policy development and decision making also need to be gauged as well as government understanding of community participation.
Public Finance Management: This involves an improvement in financial management, revenue collection, and administration. Some ADB Pacific Developing Member Countries have adopted basic ideas for budget implementation, but it has been difficult for them to understand and apply the concept. Even though some of them have attempted to implement some measures in the medium term, the quality and sustainability has been questioned, and there is no formal mechanism to collect and incorporate input from civil society into the budgetary process.
Law and the regulatory framework: Regionally this framework is weak and undeveloped: rules are very monopolistic; there is a lack of capability; legal drafting is not supported by the accuracy of policy instructions; there is a lack of strength on the part of the police in monitoring corruption, as well as in their ability to carry out investigations for prosecution.
Judicial System: It must always be independent, free of corruption and provided with the resources to ensure the deliverance of justice.
Civil Society: There should be freedom to obtain information, to speak and to associate guaranteed in the Constitution. For NGO’s, advocacy skills are not enough, particularly in the financial environment. Different sectors of civil society in the Pacific have varying degrees of strength.
East Timor’s presentation
On the last day of the workshop, each country delegation was asked to convey the problems faced in their country. Augusto Soares Barreto said that in East Timor, the problem of “Good Governance”, or corruption or nepotism was not a big problem. In East Timor, the wheels of the government run along the lines of the National Development Plan. In its efforts to implement the plan, the government is finding that it is lacking in the skills of civil servants, and capacity building is very much needed in East Timor. An example is basic computer skills.
It is clear from the second ADB regional workshop on “Good Governance” that the ADB pays a lot of attention to countries in the Asia Pacific region. We also realize that corruption, lack of transparency and accountability are serious problems in some Asia Pacific countries. However, if we analyze properly the concepts offered by the ADB such as the CGA, sometimes this does not demonstrate the spirit of Good Governance. One example is the point above which states that “there is no formal mechanism to gather ideas from civil society about the budgetary process.” This comment raised serious comments from some of the participants at the workshop, who questioned the involvement of civil society in the process. If the ADB really wants to implement “Good Governance”, why doesn’t the ADB involve civil society in formulating the budget? In regard to consultation with civil society, it is still not clear what consultative mechanism is exercised in East Timor.
People need goods, like food and clothing, and essential services like water, electricity, education and health care. One of the most controversial issues in recent decades has been how these goods and services should be provided. What is better provided by the market or the private sector, and what should be provided by the government or the public sector?
In developed countries, governments have sold many formerly publicly owned companies and utilities to private companies over the past two decades. Now most people buy their water, electricity or gas from a private, profit-making company. Other services, such as telecommunications, rubbish collection and transport, are also provided by the private sector, which is also becoming involved in education and health care and even prisons and policing services. This model of privatizing formerly public sector utilities like electricity and water is forced on developing countries by international financial institutions like the International Monetary Fund (IMF), the World Bank, and the Asian Development Bank (ADB), who place conditions on their loans. It is also encouraged and promoted by major donors like the United States, United Kingdom, Australia and Japan. This kind of pressure leaves very little room for people to explore alternatives.
From Africa to Asia and South and Central America to the Caribbean there are many failures of privatization. There is no conclusive evidence that privatization of public utilities leads to better service in developed or, more importantly, developing countries, but it very often leads to higher prices. The Dominican Republic privatized electricity and the service got worse and electricity prices are now among the highest in the world. The Bolivian government awarded a 40-year concession to run the water and sanitation system of Cochabamba to Aguas del Tunari, a consortium controlled by Bechtel, a large infrastructure company from the United States. The huge increase in water prices caused demonstrations and riots because people were unable to pay.
The World Bank, the IMF and the ADB say they use the profit-motivated energy of the private sector for the social good in developing countries. This is mindless and particularly cynical when the companies that usually buy into the public sectors are big, rich and powerful, and whose profits come from exploiting the poor. It may be true that in a competitive market private sector companies have to be efficient to make a profit and survive. However, a competitive market does not exist in the provision of water, electricity, health care and education, particularly in a developing country like East Timor.
Moreover public sector services like water and electricity in developing countries are normally unattractive propositions for private sector companies. They require large initial investment, so it takes a long time for companies to make money. If they can’t make a profit they don’t invest. The UK firm Biwater withdrew from a water project in Zimbabwe because people were too poor to pay the minimum price Biwater wanted for its water; the profit margin wasn’t big enough.
To encourage investors in unattractive infrastructure projects, developing country governments can do a number of things. They can raise the prices to increase the potential profit margin. In Buenos Aires (Argentina) and Manila (Philippines), the governments increased the prices of water and electricity to encourage investors before privatization. Or, they can break up public sector companies, selling off the most profitable parts while keeping the parts that don’t make quick profits. In Guinea and Côte d’Ivoire, the governments were able to sell off the most profitable parts of the public water companies, the parts responsible for billing and metering water usage. However, private companies wouldn’t buy the other parts, which the governments had to maintain at a loss.
To invest, private sector companies seek guarantees from governments that they will make a profit. These `take or pay’ guarantees mean that a private sector company will build, for example, a power station and take all the profit for 20 to 30 years, and then hand it over to the government. These agreements have caused big problems for developing countries like the Philippines and Vietnam. In India, the government has to pay the disgraced American company Enron for electricity the people of Maharashtra state cannot afford to buy from the Enron-Dahbol power station. In some cases such as in the Kipevu power station in Kenya which is sponsored by the International Finance Corporation (part of the World Bank group), the Kenyan government has had to agree to pay 140% of what is required into a separate bank account to guarantee that the investors get their money. In these cases, the developing countries lose out, while the investors make their guaranteed profit at the expense of the poor. This is not development or poverty reduction. It is exploitation.
The only limit to exploitation is government regulation. But governments often cannot regulate privatized sectors because they are taken over by enormously powerful and rich companies. There is very little governments can do, particularly in developing countries with new institutional and regulatory systems. In countries that have relatively strong regulatory systems such as the UK some private companies that have bought into the public sector now want to withdraw, as the regulations limit how much money they can make.
The World Bank, International Monetary Fund and Asian Development Bank say that privatization will help economic growth by developing the private sector, but it is unclear how selling public sector utilities, very often, to large transnational companies will do this. More commonly, the private sector tries to stifle out competition and avoid government regulation to maximize profits. The IFIs also say that privatization will increase investment. However for many developing countries, such as in Africa, few investors are interested in privatization, so governments have to offer concessions like tax breaks to encourage investors. Privatization is supposed to let governments spend money on reducing poverty rather than having to invest in infrastructure, but frequently governments incur further financial burdens such as guaranteeing a company’s profits or maintaining loss-making state companies after the more profitable parts have been sold off.
Private companies want to maximize profits and have little motivation to meet people’s needs. Water, electricity, health care and education are not a marketable commodities. They are basic necessities which people have a right to.
In East Timor, a foreign private company, Macau Electricity Cooperation (CEM) has been given a concession to manage Electricidade de Timor Leste (EDTL) for three years, and a separate company has been contracted to begin installing pre paid electricity meters. EDTL has not been privatized as all the assets will return to the government after three years.
East Timor, like many countries in the world, has very little money to invest in electricity, water and other essential services, so this country must analyze all available options. The East Timorese people must decide what is public and best provided by the government and what is private and best provided by the private sector, and the international financial institutions and foreign donors must let them make their own decisions.
La'o Hamutuk, The East Timor Institute for Reconstruction Monitoring and Analysis
P.O. Box 340, Dili, East Timor (via Darwin, Australia)
Mobile: +(670)7234330; Land phone: +670-3325-013
Email: email@example.com; Web: http://www.laohamutuk.org