Letter to Parliament regarding the Timor-Leste Petroleum Fund Law

from Jenny Drysdale, Australian National University

to Parliament Commission C

Jenny Drysdale
PhD student
Centre for Resource and Environmental Studies
Hancock Building (No. 43)
Canberra ACT 0200 Australia

T: +61 2 6125 1651    M:+61 407 230 772
Timor Leste Mobile 724 4664

8 June 2005

Honourable Members of Committee C
C/- Parlamento Nacional
Republica Democratica Timor-Leste
Dili, Timor-Leste

Your Excellencies:

Individual submission regarding the proposed Petroleum Fund Law

Please allow me to introduce myself. For those of you who do not know me I am a PhD student writing a thesis about Petroleum Revenue Management in Timor-Leste. Previously, I worked in Timor-Leste through Australian Volunteers International and later as a UNV with the Environmental Protection Unit and the Office of District Affairs.

It is a great joy to work with the Government and people of Timor-Leste in my research and an honour to participate in the consultation process to develop this Petroleum Fund Law. I would like to congratulate the Government of Timor-Leste on their initiative to establish a Law that encourages transparency and accountability and the wise management of Timor-Leste’s petroleum revenue.

Committee C has the important task of making final amendments to the Law and as you prioritise the best interests of the people of Timor-Leste, I am writing to bring two crucial matters to your attention. I respectfully encourage Committee C to review the Law in light of my comments in order to prevent future governments from misusing the petroleum revenue.

(1) Lack of Accountability

Since the Petroleum Fund Draft Act was circulated for consultation the following text has been deleted from Article 11 (Article 8.1 in the Draft Act):

“In the exercise of any management functions and competences entrusted thereto, the Minister shall be accountable before the Prime Minister, and they both shall be accountable before the Council of Ministers and before Parliament.”

This deletion is unfortunate as it means there is no person or institution held accountable for any actions that result in the abuse of the management of Timor-Leste’s petroleum revenue.

(2) Lack of a Ceiling Mechanism re Budget Transfers

Article 9 provides Parliament with the opportunity to withdraw revenue from the Petroleum Fund in excess of the estimated sustainable income for the financial year. On some occasions this will be necessary and appropriate. However, in the future, the Petroleum Fund may hold a balance of US$3 billion or more. The Law, in its current form, does not prevent a decision being made to withdraw an amount that exceeds the spending capacity of the Government or, indeed, the entire balance. I understand the Government wishes to rely on the strength of institutions to prevent this from occurring; a ceiling mechanism would complement this strategy and provide additional security for future generations.

Without the accountability and budget transfer safeguards in place, despite the penalties and measures of transparency that are included in the Law, the possibility exists that the Petroleum Fund may be misused by future governments. With the greatest respect, I recommend you consider re-instating the text to Article 11.1 as outlined above and to include an Article which provides a mechanism to prevent excessive budget transfers.

I wish you well in your discussions regarding this Petroleum Fund Law. Please do not hesitate to contact me should you require further information or clarification.

With kind regards

Jenny Drysdale