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Timor-Leste: Lessons of a Failing State?

Timor-Leste shares the island of Timor and a bloody history with Indonesia. The former Portuguese colony was part of Indonesia from 1976 until 2002, when it was declared an independent state. The country’s small population is less than half of 1 percent of that in neighboring Indonesia, and one quarter died in fighting for independence. Despite great natural resources, the country has since struggled with rebel attacks, ruined infrastructure, instability, corruption, high unemployment and inequality. Resignation of Xanana Gusmao, founding president of the country who later became prime minister, could exacerbate the crisis, argues Loro Horta, who served as a United Nations project manager for security reform in Timor-Leste and a senior adviser to the country’s foreign ministry. Oil and gas exports account for more than 90 percent of the nation’s GDP, but reserves are in rapid decline. The United Nations and the international community invested great resources into development and peacekeeping. Horta warns that “Timor’s case also has profound implications for future international efforts at state building.” – YaleGlobal

Timor-Leste: Lessons of a Failing State?

Timor-Leste, struggling since independence in 2002, cannot take international generosity for granted
Loro Horta
YaleGlobal, 22 May 2014
East Timor, corrupt and rudderless: Finance Minister Emilia Pires, left, accused of corruption, Prime Minister Xanana Gusmao, retiring (top); pervasive poverty in the country

DILI: The leader and founding father of Asia’s youngest nation, Xanana Gusmao, announced in November that he was resigning as prime minister and leaving politics. The announcement comes amidst growing state failure and rampant mismanagement. Since Timor-Leste’s independence from Indonesia in 2002, Gusmao has dominated the small nation’s politics. His intention to resign has led many to accuse him of cowardice – after all, he carries the bulk of the responsibility for the current chaos. His resignation is likely to create a power vacuum and exacerbate the crisis.

State failure in Timor-Leste can have severe consequences for regional security creating a refugee crisis and providing a safe haven for criminal organizations and other illicit activities. Despite massive international support and oil money the country remains fragile.

More than a decade after independence from neighboring Indonesia and two United Nation interventions, the former Portuguese colony remains an impoverished and fragile state. For a decade Timor was the highest recipient of foreign aid in the world, in per capita terms, with Australia, Portugal and Japan footing most of the bill – even as the country, since 2007, has been receiving significant revenues from oil and gas at the tune of $2 billion a year. Very little has reached the common people while the country’s infrastructure remains one of the worse in the region with power cuts frequent even in the capital of Dili.

For a decade, Timor was the world’s highest per-capital recipient of foreign aid – despite significant oil and gas revenues.

According to a May 2013 International Crisis Group report, 71 percent of the workforce in East Timor is either unemployed or just informally employed.  Nearly two thirds of the country’s population is under 30 years old creating a serious source of tension. One third of the country lives in poverty and 50 percent are illiterate. As of 2010, the country had the highest rate of urbanization in the world at 5 percent a year with thousands of unemployed young men moving into the capital. Slums with deplorable conditions are emerging on the foot of the mountains that encircle Dili, while luxury houses such as the one built by the Minister of Finance Emilia Pires in Farol are being erected by a privileged few.    

Timor is no stranger to poverty. However, the appearance of small pockets of affluence next to abject poverty is new. Child prostitution is common, even among school children. In June this year the secretary of state for gender told the media that prostitution was increasing in the country, particularly among high school students.  

Corruption is fast becoming endemic with several scandals exposed in the media involving ministers and other senior officials. The most ridiculous case is that of the minister of justice, in contempt of court for refusing to pay child support to his chronically ill child. 

Following the July 2012 elections Gusmao created the largest government in the Asia Pacific with a cabinet made up of 55 members – this in country with a population of just over 1 million. Not surprisingly, the state bureaucracy is in total disarray with Gusmao himself admitting that most of his numerous ministries are only able to use about 30 percent of their yearly budgets allocated to the ministries. Public servants go for months without pay, and hundreds of international advisors go for a year without pay. The government is not only ridiculously large, but includes ministers accused of murder to sexual assault.

Timor is no stranger to poverty. The appearance of small pockets of affluence next to abject poverty is new.

The country has one of the most generous retirement packages for its politicians. Ministers, deputy ministers, members of parliament, judges and other senior officials are entitled to a life pension that varies from $2500 to $4000 after completing a five-year term – in country where the per capital income is $3335. Neither the government nor the opposition has been keen on changing the law, instead spending millions on luxury cars, houses and trips abroad while unemployment continues to grow. So far Prime Minister Gusmao has kept a fragile peace by spending significant amounts in expanding patronage networks, awarding contracts and other benefits to supporters and buying off critics.

The strategy works – as long as the state continues to have access to generous finances from the country’s oil wealth. The off-shore oil production creates few jobs because of minimal production and refinery capabilities. Another problem, several studies indicate that the country’s oil and gas reserves will last for another 15 years at most. More than a decade of independence, riots, corruption and outright arrogance on the part of the young nation’s leaders have led to an economy completely dependent on oil and gas, one that produces little else. Oil and gas exports account for more than 90 percent of the nation’s GDP, the highest dependence on natural resource extraction in the world. The Asian Development Bank estimates that in 2014 the country’s oil revenues will decline by 41 percent.

There are some signs of hope. Timor remains a democracy, its media among the freest in the region. Figures like President Taur Matan Ruak, a former chief of defense force and guerrilla fighter, and Minister for State Agio Pereira are widely respected for their honesty. The country’s former prosecutor general, the implacable and ill-humored Ana Pessoa jailed several senior officials including former Minister of Justice Lucia Lobato. While Pessoa was eventually replaced after some obscure maneuvers, her successor seems determined to carry on her legacy. When Pessoa was forced out of office in March 2012, the local media run headlines proclaiming, “She is still our prosecutor general” and the US ambassador held a farewell party. A survey of law students found that over 80 percent wanted to become prosecutors. 

Despite many challenges, Timor-Leste remains a democracy and perhaps in the end that may be its salvation.

Oil, gas exports account for 90 percent of Timor-Leste’s GDP, the world’s highest dependence on natural resource extraction.

In January 2014 Gusmao reaffirmed his intention to resign, adding that the state was in complete disarray and something needed to be done soon. He has promised on several occasions a radical reduction in the size of government and a serious crackdown on corruption. His resignation will only accelerate the process of state failure. Ironically, Gusmao oversaw such a state of chaos and only he can fix it. Citizens wait to see if the hero of independence and the father of Asia’s youngest nation has the courage to lead the nation in what maybe is its most difficult hour. Or, will he take the easiest option and leave?

Timor’s case also has profound implications for future international efforts at state building. If a tiny territory rich in resources that received generous support from the world fails, then what are the chances for less prosperous territories? Since the early 1990s international efforts at state building have increased, however there are few success stories. While the international community has hailed Timor a success story this may turn out to be a self-deceiving exercise.

Timor-Leste due to its heroic struggle for independence that saw a quarter of its population butchered by the Indonesian military has and still elicits great sympathy from the international community. The country and its leaders should not take such generosity for granted as the great hopes that once inspired its many supporters around the world are slowly fading away.


Loro Horta was the United Nations project manager for security sector reform in Timor-Leste and a senior advisor to the country’s foreign ministry. He has written extensively on Timor-Leste for over a decade.
Rights:Copyright © 2014 The Whitney and Betty MacMillan Center for International and Area Studies at Yale

Comments on this Article

27 May 2014
Well Loro maybe a bit inflammatory, but I guess he is trying to get people to look at the many problems facing Timor. There is still a lot of room for Timor and the country will not fail. However, urgent changes are needed, Gusmao himself admitted that several ties. So when some so Loro got most of the fact wrongs well than Xanana is also wrong
-Carla Santos , .
26 May 2014
Readers should be aware that this alarmist rhetoric, offered without evidence and based in hyperbole, is just invective posing as analysis. This is the well-known language of 'disaster capitalism' widely criticised by many of the world's most respected intellectuals. Predications of chaos, crises, a corrupt and rudderless state pander to security 'experts' who need to predict failure in order to manufacture themselves as insightful. In fact these fantasies are the same as those Indonesia and many Australian politicians used to back up a brutal invasion and forestall independence - Timorese could not govern themselves. It is the same alarmist rhetoric used by so-called 'experts' who said that Timor-Leste would go up in flames during the last elections. Absolutely incorrect of course, although none of these harbingers have apologised. Most have pulled their heads in but a few have just moved on to make the same inaccurate predictions over and over again. This is completely outmoded stuff. It has been at least four years since any credible commentators have written off Timor-Leste as a failed or failing state.
Everything said about Timor-Leste could equally be applied to Australia, so why are we not predicted as a failing state? Recently a State Premier and senior ministers resign in a corruption investigation. Most of the leadership of both main parties at a state level with links to federal politicians under investigation for corrupt practices. The previous federal government speaker resigns in a corruption scandal. Trust in politicians at an historic low. Major street violence including almost daily murders and gang wars. Huge drug and alcohol problems amongst youth. A Royal Commission into union corruption. Another Royal Commission into appalling child sexual abuse in the church and community organisations. And yet another Royal Commission into government mismanagement of a program that led to serious injuries and four deaths. Predicted $600 billion national debt within four years. A dysfunctional government that cannot get its annual budget passed and is looking down the barrel of a double dissolution. Government launches major attacks on the most vulnerable members of the community. Absolutely incompetent electoral practices that led to an enormously expensive state reelection. UN consistently identifies Australian government as having failed its basic human rights obligations in regard to our indigenous peoples and refugees. Members of our indigenous communities living in abject poverty with an ever widening wealth divide. Australia caught breaching international law in spying on neighbouring states.
If Timor-Leste is a predicted failed state, Australia is already there. My experience of living and working in Timor-Leste over the last eight years is of a remarkably generous and courageous people and a state that has in a very short time has built itself up from the ashes of one of the most vicious occupations in recent history. If Timor-Leste is in the condition described Australia has gone down the tubes already.
-Prof. Richard Jones , Failed state rhetoric
24 May 2014
Being dependent to one industry, i.e. oil, plus top heavy number of government staff put a heavy burden in Timor-Leste's finances.
In my short work engagement in Timor-Leste, and to be fair for this article, one of the hard working ministers of the current government is the current Minister of Finance.
The trend is not encouraging, esp. with rampant corruption, generous benefits for politicians, such as abuse in their medical privileges, etc. The fruit of their struggle for independence may be short-live unless the politicians and those that work in government change their ways.
Politics has not yet reached its maturity, being overwhelmed by personal and political interest, instead of truly service to the people of Timor-Leste. Time is running out, and time to change from the "old ways" has to be done urgently. There is still hope but changes have to be drastic.
-Ricardo Atencia , Trim Down The Government
23 May 2014
Sure Charles your own NGO provides an impartial view, please spare me, and why don't you be honest and mention that Loro was very critical of his own father when he was President while ur NGO was begging his father for funds , yes he spent a lot of time abroad working for a leaving with the UN is fail states usually unlike the sons and daughthers of other ministers , no one as ever heard he ever got involved in corruption. u are just gelous as always u are eager for attention
-Chico , Sure Charles your own NGO
23 May 2014
It is good that he pointed out some true facts - but the article seems to be over pessimistic as if there is no young educated and responsible Timorese to be around after these old folks retired from the politics. Some highlights appeared to be a bit biased, notes on Pessoa's works (conflict of interest). I would not praise my associates in such a professional article. Let others judge. I think he needs to elaborate more on some facts - his projection on the depletion of oil and gas is probably based on one field.
-Florentino Ferreira , It is good that he pointed
23 May 2014
As I posted in a Dili-based Facebook discussion, there of course are severe problems. That said, other countries have pulled back from such a brink, and Timor-Leste could learn from them. In particular, Georgia, a small country in the Caucasus, practically was a failed state in 2002 and then turned itself around within two or three years. Not all went well, but it was still a huge success. I think policymakers and commentators in Timor Leste should look at the Georgian case closely. If there is a political will to change, it is a great model.
Here is a link to the WB report:
-Hans Gutbrod , learn from other successes
23 May 2014
Viva maun Loro, he is one of the few people who still dares tell the true, please brother don't accept the post as Ambassador to China, they are trying to buy you the think they can buy any one. VIVA TIMOR
-Chico Labarek , Viva maun Loro, he is one of
22 May 2014
Readers should be aware that "the implacable and ill-humored Ana Pessoa" is Loro Horta's mother. Former Foreign Minister and President Jose Ramos-Horta, who lost his 2012 bid for re-election to Taur Matan Ruak, is his father. Some of the trends Loro describes are real (although many details are incorrect), but Loro Horta has spent little time in Timor-Leste in recent years and one wonders if his vitriol is influenced by his personal circumstances.
For a more diverse, accurate and objective view of developments in Timor-Leste, see, the civil society organization where I work.
-Charles Scheiner , Context