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East Timor

Development Challenges for the World's Newest Nation

Hal Hill and Joao M Saldanha

Publication Year: 2001

The challenges facing an independent East Timor are particularly acute. It is not only one of the poorest nations on earth but the terrible events of 1999 have also destroyed much of the country’s buildings and infrastructure, as well as the nation’s bureaucratic and commercial capacity. The decisions and the policy framework adopted in the early years by the leaders of this new nation will be critical. This book is an original work written by experts and well-known specialists in the field. It assembles all the latest information about the economy, assesses future policy options, and draws on lessons of international experience for this new nation. It is perhaps the only book about East Timor with this coverage and will be invaluable to those who are interested in developments in the region.

Published by: ISEAS–Yusof Ishak Institute

Title Page, Copyright

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pp. v-vii

List of Tables

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pp. viii-ix

List of Figures

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pp. x

List of Maps

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pp. xi

List of Contributors

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pp. xii

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pp. xiii-xv

It is a great pleasure to thank the many people and institutions who have contributed to this volume, and to the Dili Economic Forum on which it is based. We began to plan this exercise seriously at a conference on East Timor in Washington DC in August 2000. ...

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pp. xvi-xviii

Since the dreadful destruction of September 1999, East Timor has been undertaking the task of economic reconstruction under the guidance of the United Nations Transitional Administration in East Timor (UNTAET) and with the assistance of the multilateral and bilateral development agencies. ...

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pp. xix-xxi

The most alarming consequence of economic recession in developed countries is unemployment. In underdeveloped countries like East Timor, this is the lack of economic means. Unemployment causes humiliation and depression, leading to drug use, delinquency, family crisis and despair. ...

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pp. xxii-xxiv

East Timor opened a stormy new chapter in its history on 30 August 1999 when its people voted overwhelmingly for independence from Indonesia. More than 98 per cent of registered voters defied intimidation to cast their ballots in an orderly and peaceful manner. ...

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pp. xxv-xxvi

It is recognized that sound economic policies are critical to the socio-economic development of a country. This is a complex task. The policies and strategies need to be ‘owned’ by stakeholders, including government and civil society. It is challenging to implement them and to monitor their developmental impact. ...

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1. The Key Issues

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pp. 3-38

This volume offers a forward-looking perspective on the economic development of East Timor. It traces the country’s ‘initial conditions’, assesses and adapts the lessons of international experience, and contains detailed discussions and recommendations across a broad range of subjects. ...

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2. Currency and Monetary Arrangements for East Timor

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pp. 39-51

An important decision in the design of macroeconomic policies in any country is the choice of currency and monetary regime. Not surprisingly, there is an enormous literature on currency and monetary regimes. This chapter sets out a policy menu for East Timor based on this literature, constructed in a way that suits the country’s characteristics and needs. ...

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3. Folly or Foresight: Strategic Options for Fiscal Policy in East Timor

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pp. 52-70

East Timor is starting over. It is very much like the mythical phoenix, rising from the ashes of its recent destruction to become the newest member of the world’s family of nations. Most of East Timor’s physical infrastructure has been destroyed. Its service delivery and marketing networks are not functioning, ...

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4. Trade and Commercial Policy

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pp. 71-83

Trade and commercial policy is one of the keys to a prosperous and viable East Timor. Along with macroeconomic and social policies, and institutional development, no set of policy issues is more important. ‘Openness’, variously defined, consistently emerges as a significant and positive factor in the large ‘determinants of growth’ literature ...

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5. East Timor's Economic Relations with Indonesia

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pp. 84-98

President Abdurrahman Wahid’s visit to East Timor in February 2000 paved the way for an important process of reconciliation between Indonesia and East Timor. This process may bring about more far-reaching results than reconciliation, namely Indonesia’s constructive role in the development of East Timor as an independent state. ...

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6. Food Policy in East Timor: Linking Agriculture, Economic Growth and Poverty Alleviation to Achieve Food Security

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pp. 99-109

No country can survive for long without reasonable guarantees of food security for the vast majority of the population, and East Timor is no exception. There are multiple ways of achieving food security, but a guarantee of stable food supplies in urban markets is a quite separate concept —– and governmental task ...

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7. The Rural Economy and Institutions in East Timor

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pp. 110-124

The rural economy is pre-eminent in East Timor, and must necessarily underpin future economic advances there. This chapter examines that economy, looking especially at the possibilities for technical improvement and ways to implement changes so as to enhance economic growth and social welfare. ...

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8. Coffee and the Economy in East Timor

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pp. 125-139

Coffee is a critical crop for East Timor, for three reasons: it is East Timor’s most important export (at least until gas production begins in the Timor Gap); it is the most important source of cash income for a significant portion of East Timor’s impoverished rural population; and coffee processing is an important source of seasonal employment. ...

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9. Agriculture, Comparative Advantage and the Macroeconomy

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pp. 140-154

Many years of colonization without real development, followed by a deliberate wave of looting and destruction, form the backdrop for the rehabilitation and development work now under way in East Timor. Agriculture cannot be regarded in isolation from its wider context, which includes transport, markets and sustainability. ...

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10. Diversity and Differential Development in East Timor: Potential Problems and Future Possibilities

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pp. 155-176

East Timor is a remarkably diverse territory. It is certainly as diverse in ecological terms as it is in its linguistic and ethnic make-up. A long history of human settlement has contributed to this diversity, shaping the environment as it has the cultures of the territory. ...

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11. Property Rights in East Timor's Reconstruction and Development

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pp. 177-192

Economic theory increasingly asserts the importance of property rights to economic development. Yet, while much has been written on what property rights are, and why they are so important, less has been written on which types of rights should be recognized. ...

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12. Future Political Structures and Institutions in East Timor

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pp. 193-208

How should East Timor try to combine ‘disciplined governance and democratic principles’? How might it best aim to create ‘a political order supportive of broad economic goals’ such as prosperity, social justice and national unity, and at the same time build political institutions that will be ‘conducive to good policy-making’ ...

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13. Finance Policies for East Timor

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pp. 209-221

What kind of banking and finance sector does the new nation of Timor Lorosae need? What actions are required on the part of the new government to ensure that the right kinds of institutions and markets emerge? What government policies are required in order to encourage appropriate behaviour by these institutions? ...

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14. Transport and Power

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pp. 222-240

This chapter aims to crystallize the transport and power sector policy issues that challenge the Transitional Administration in East Timor and that will face the new East Timorese indigenous administration immediately after its inauguration. These issues have loomed large as the backdrop during the emergency rehabilitation phase of 1999-–2000. ...

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15. Poverty, Equity and Living Standards in East Timor: Challenges for the New Nation

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pp. 241-255

The new nation of East Timor will certainly wish to improve the living standards of the population, and will no doubt give top priority to the goal of poverty alleviation. The purpose of this chapter is to suggest which policies may be most effective in achieving this goal. The first part of the chapter examines the legacy of the years 1975–-99, ...

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16. Social Policy Issues in East Timor: Education and Health

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pp. 256-274

There are obvious connections between economic growth and human development: ‘On the one hand, economic growth provides the resources to permit sustained improvements in human development. On the other, improvements in the quality of the labour force are an important contributor to economic growth’ (Ranis et al. 2000: 197). ...

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17. Country Size and Economic Performance: A Community with Implications for East Timor

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pp. 275-287

The relationship between country size and economic welfare is imprinted, rightly or not, in the perceptions of policy-makers and lay people. In spite of this, little attention has been devoted until recently to studying the specific issues that affect small countries. There are at least three good reasons to study small countries. ...

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18. Reconstruction for War-torn Economies: Lessons for East Timor

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pp. 288-305

The starting premise of this chapter is that East Timor has enough similarities with war-torn economies elsewhere for it to be useful to consider the lessons from the experience of those other countries. In particular, we would like to draw on international experience to help answer a fundamental question: ...

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19. Lessons for Development from Pacific Island Countries

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pp. 306-320

It is rare to have the opportunity to contribute to the design of the policy settings of a new nation. The primary objective of such design is to accelerate the pace of development. Often the resource constraints faced at this initial stage of development are severe, allowing only a handful of interventions; ...

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20. The Papua New Guinea Experience: Some Issues for the Early Years of East Timor

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pp. 321-335

Like Papua New Guinea, East Timor is a very small economy in global terms. Both economies are heavily dominated by subsistence-related activities and small-scale services, and are extremely vulnerable to external shocks. Sustained improvement in living standards will require massive investment in human resource development ...

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21. Aid, Shocks and Trade: What East Timor Can Learn from African Experience

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pp. 336-350

The typical African economy is small and poor: the whole region (excluding South Africa) has an economy the size of Belgium, divided into nearly 50 countries. If East Timor wishes to learn from others’ experience of being small and poor, Africa is the place to look. ...


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pp. 351-368

Author Index

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pp. 369-372

Subject Index

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pp. 373-381

E-ISBN-13: 9789812305824
Print-ISBN-13: 9789812301413

Page Count: 382
Publication Year: 2001

Edition: 1