Dili Launch of UN ESCAP Survey
2013 Economic and Social Survey of Asia and the Pacific
23 May 2013
On 18 April 2013, the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP) released its annual flagship publication, the Economic and Social Survey of Asia and the Pacific, which is available for download from the UN ESCAP website. The survey was launched simultaneously at 37 locations around the world, including Hotel Timor in Dili. The Dili event opened with a video message from ESCAP head Dr. Noeleen Heyzer, who stressed the need for forward-looking macroeconomic policies including, among others, employment guarantee schemes, social protection and investment in human capital.
UNDP and ESCAP distributed several handouts at the event, including a press release (also Tetum), Timor-Leste country notes (also Tetum), executive summary (also Tetum), and one-page Feature Notes on Macroeconomic Policy (also Tetum), China's Rebalancing (also Tetum), Minimum Wage (also Tetum) and Policy Uncertainty (also Tetum).
La'o Hamutuk has been given permission to circulate presentations from the Dili launch, summarized below in the order in which they were presented. Follow links for available texts.
Minister of Commerce, Industry and Environment António da Conceição gave the principal address, underlining that employment should be at the center of macroeconomic policy. He pointed out that Timor-Leste's high GDP growth, coupled with reliance on petroleum, has been accompanied by import dependency, inflation, poverty, deprivation and insecure employment. The Minister recommended making Timor-Leste's economic growth more sustainable and inclusive by seeing the agriculture sector as the main employer, promoting decent, high productivity work opportunities for the poor (particularly poor women), improving social and physical infrastructure, recognizing Timor-Leste's vulnerability to environmental disasters, and expanding inclusive finance.
UN-ESCAP economist Clovis Freire presented a PowerPoint overview of ESCAP report and its relevance for Timor-Leste. He said that "Grow first, distribute and clean later" is no longer viable or acceptable.
Four people from diverse perspectives responded to the presentations:
National University Rector Aurelio Guterres stressed the importance of continued investment in human capital through technical and professional training. A forthcoming UNTL study points to the fact that out of the new entrants into the labor market each year, 8,000-10,000 are considered as "disguised unemployment." In order to avoid the massive migration from rural areas to the urban area of Dili, higher education facilities will now be set up in the districts. The sustainability of Timor-Leste’s economy does not depend on the revenues from the Petroleum Fund but on developing productive sectors such as agriculture and tourism, as well as downstream petroleum activities.
Ministry of Finance Senior Economic Advisor João Mariano Saldanha assured the audience that Timor-Leste can maintain double-digit growth until 2020. The key to create resilience and sustain the economy beyond dwindling petroleum revenues lies in the private sector. Given the structural issues, this sector, however, is expected to take off in a decade or so.
World Bank Senior Economist Hans Anand Beck said that many countries in the Asia-Pacific region have already increased emphasis on macroeconomic policies that support development objectives, reflected in part by their response to the global financial crisis. In countries such as Timor-Leste, which have rapidly increased public spending to meet important development needs, the quality of public spending is critical, as is ensuring the right pace and balance between investing in capital intensive infrastructure and human capital. Maintaining a high quality of spending is essential to deliver lasting pro-poor impacts. This year’s state budget reflects thinking about this. Economies developing rapidly can experience rapidly rising prices, and the effects on the poor must be carefully monitored and mitigated. Initiatives to improve an economy’s productive capacity can help tackle inflation in the longer term, especially by catalyzing private sector activity and nurturing small and medium enterprises (SMEs).
La'o Hamutuk researcher Charles Scheiner was the last panelist. As this is La'o Hamutuk's website, we summarize his comments at greater length:
We need to start where we are today. Timor-Leste is a new, young, small country. The State dominates the economy; our private sector is tiny and we depend on imports for basic necessities. We are the second most petroleum-export dependent country in the world, but it won’t last forever. Recent reports confirm that child malnutrition and multi-dimensional poverty are among the worst in this region and the world.
Donors to civil society organizations often ask us to quantify the results of our work, and this is a greater challenge when evaluating the development of an entire nation over decades. Unfortunately, GDP and GDP growth have become universal indicators. However, economic growth fueled by exporting limited, nonrenewable resource wealth is intrinsically unsustainable -- unless we change direction, Timor-Leste’s GDP could plummet when the oil and gas is gone, which may be in less than a generation.
Although Timor-Leste’s non-oil GDP has grown at double-digit rates, today more people are living in poverty. International agencies and government policy-makers may lack precise data, but those who struggle daily without adequate food, water, sanitation, education and health care know the reality.
Timor-Leste’s government has already implemented many recommendations in ESCAP’s report:
Government spending has increased rapidly, and is larger than our non-oil GDP. Although ESCAP supports this as “forward-looking macroeconomic policy,” they emphasize the quality and composition of public expenditure. How do we move away from spending on today’s desires and infatuations to invest in our children’s future? How can we improve vision, realistic planning and accountability to achieve economic and social justice?
Timor-Leste has implemented a universal, non-contributory pension for people over 60 and another for disabled people. However, most public transfers go to veterans and their families, which threatens economic stability and increases the risk of conflict. Last year, we spent more on veterans’ benefits than we did on education.
ESCAP proposes a job guarantee program and an effective minimum wage, which Timor-Leste has partially implemented already. However, with high unemployment, an imminently doubling youth population and many people outside the formal sector, a more holistic approach is required. Timor-Leste has tremendous needs in education, health care, rural infrastructure, agriculture and other labor-intensive sectors. Can we consider our young people as a resource to help address these necessities, rather than seeing them as a problem to be controlled, pacified, kept busy, or sent overseas?
Timor-Leste has invested heavily in energy, building far more generating capacity than ESCAP suggests. Electricity can make people’s lives more comfortable and facilitate economic development. However, the current system, using expensive imported fuel, will cost more than 10% of our annual non-oil GDP to run, subsidizing affluent people who use more kilowatt-hours. Can we provide a basic level of power free to everyone, while asking those who consume more to pay for it? Currently, EDTL only bills consumers for one-fourth of the cost of electricity generation and distribution.
Timor-Leste’s Strategic Development Plan (SDP) and ESCAP’s report both advocate increasing the share of energy from renewable sources. How can we promote policies to advance this goal?
I’d like to highlight three ESCAP recommendations which will require a change in direction.
ESCAP calls for universal primary education by 2020 and secondary education by 2030, and the SDP has similar goals. This is not just names on enrollment lists or children sitting on classroom floors without enough books or capable teachers. We need learning which will improve people’s knowledge, understanding, and capacity to participate in economic development. We need a basic level of education for everyone, not only for those lucky enough to attend reference schools or university. The word “quality” appears eight times in the SDP’s education targets – how can we achieve this promise?
ESCAP suggests public health expenditure equal to 5% of GDP, a worthy objective which would require tripling current levels in Timor-Leste. This will advance both human security and economic development. Although we have reduced infant and maternal mortality, Timor-Leste still loses about four young children every single day to preventable and curable illnesses. Higher spending can make health care more accessible and effective, but unless we repair deficiencies in the system itself – as well as in nutrition, sanitation and public awareness – our most vulnerable people will continue to die.
ESCAP points out that "Neglect of the agricultural sector contributes to poverty, inequality and food insecurity." Today, Timor-Leste imports water, chickens, onions, rice, fruit juice and all processed foods. We spend only 2% of our state budget on agriculture, the livelihood of 80% of our people. Can we improve farmers’ productivity and develop a food-processing industry? This will not only move us toward food sovereignty, but will create jobs and reduce the amount of our national wealth that flows out of the country.
On 29 April, Timor-Leste Prime Minister Xanana Gusmão addressed the 69th ESCAP session in Bangkok. ESCAP chose Timor-Leste as its president for the next year.