East Timor: Development Challenges for the World's Newest Nation

7. The Rural Economy and Institutions in East Timor

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. It also makes recommendations on government policies that would promote these goals. BACKGROUND CONDITIONS East Timor’s dry but variable climate, mountainous topography, soils and modes of agricultural activity in East Timor are discussed by Fox in Chapter 10. The physical conditions of the territory are difficult, but usually well managed by an adaptable and resilient people living in scattered villages and with generally plentiful land. These people have evolved modes of living and farming suited to their circumstances, but still have problems of food security owing to the unpredictability of the climate. Such problems were exacerbated by the destruction accompanying the Indonesian withdrawal in late 1999. Agriculture Data on East Timorese agriculture in 1970–95 are presented in Table 7.1. While approximate, they help to denote the underlying capacity of the sector using existing technologies. The data indicate increases up to 1995 in area under cultivation , exports of coffee and numbers of cattle and pigs, but declines in land planted with coconut and rice. Exports of copra fell, mainly due to rising local consumption, while rice imports grew strongly owing to the inability of local production to keep up with rising demand. 110 7 The Rural Economy and Institutions in East Timor Colin Barlow East Timor/final 29/7/01 6:21 PM Page 110 While maize, cassava and sweet potatoes were grown largely for home consumption , rice produced good returns for growers. Coffee, copra, some root crops and vegetables, live fattened cattle, pigs, goats and chickens were all significant earners of cash for certain groups of farmers in particular locations. Returns from these items supplemented the basically subsistence livelihood of farm households, bringing in revenue that could be used to buy consumer items and production inputs. However, the Indonesian forces as they left in 1999 killed many livestock, whose numbers will take long to recover. More details of past and present agricultural production in East Timor are given by Fox in Chapter 10. A good account of the country’s geography, climate and agriculture is provided by Metzner (1977). Further useful information on agriculture and rural society is supplied by Mubyarto et al. (1991), Simpson and Larsen (1999), Chapman (2000) and AusAID (2000). The climate and associated cropping systems of East Timor are examined by Keefer (2000), and agricultural development is scrutinized in the broader national context by Saldanha (1994) and Barlow (2000). Rural Trade and Credit The primary emphasis on subsistence means trade is often minimal, with barter frequently being more common than exchanges of money (see, for example, Forge 1991). Markets are ‘incomplete’, in the sense that information about commercial opportunities is limited and there is often little opportunity to sell products or buy necessities. Trade fell substantially during the recent troubles, with many dealers departing and marketing networks, including links with West Timor, being disrupted. Yet even in ‘normal’ times, the prices obtained by farmers for their produce have been low because of the high costs of transport on East Timor’s poorly maintained roads (see Chapter 14, this volume). Wide fluctuations in prices and the vagaries of a changeable climate also affect farmers’ revenue. In March 2001, for instance, the world price of coffee was about half what it had been a year previously, and this change was amply reflected at the village level. Shortages of cash are accordingly a major constraint to introducing improvements in rural areas. There are virtually no local lenders of money, chiefly because repayment is not feasible. The rural population restricts cash purchases to essential foods and key items such as kerosene and salt, again paying high prices owing to the cost of transport. Thus, even apart from considerations of information, skills and risk, farmers find it hard to adopt new cultivation techniques if this involves buying special equipment. Without credit and help in acquiring skills, it will take decades for profitable new techniques to be used widely in rural communities, in a slow ‘bandwagon’ process whereby the innovative few are watched and ultimately copied by those around them. The Rural Economy and Institutions in East Timor 111 East Timor/final 29/7/01 6:21 PM Page 111 Social Systems The...