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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 and physical infrastructure to allow people to improve their productivity by engaging in a more diverse range of economic activities. Papua New Guinea had independence thrust upon it by Australia. In contrast , East Timor had to pay a very high price for its independence. In both cases, there was far too little planning for a transition to nationhood. Like Papua New Guinea 30 years ago, East Timor’s physical infrastructure, health and education levels are inadequate. The economy and the functioning of government depend heavily on financial resources and expertise from the rest of the world. International agencies will have very substantial influence on the transition to genuine independence, but the extent of their support or influence cannot, and should not, be expected to continue indefinitely. As it approaches independence, East Timor is looking forward to substantial revenue from off-shore oil and gas production, which could replace dependence on aid. Such revenue should not be taken for granted. Much depends on sustaining a political and economic environment that can attract the necessary foreign investment, whose profitability will depend on international oil and gas prices. Papua New Guinea also expected to earn substantial revenue from mining and petroleum, but these flows proved insufficient to offset a rapid decline in development assistance. Moreover, as in many other countries, it proved very hard to invest either aid or mineral revenue to build the basis of a sustainable, diversified economy. 321 20 The Papua New Guinea Experience: Some Issues for the Early Years of East Timor Andrew Elek East Timor/final 29/7/01 6:23 PM Page 321 These similarities suggest that some of Papua New Guinea’s experience may be relevant to East Timor. There are some lessons to be learned from Papua New Guinea, which managed the early transition to independence quite well but found it impossible to sustain its good performance. Papua New Guinea’s GDP rose by an average of 1.6 per cent per year in the decade to 1987, then by 4.6 per cent in the decade to 1998. That represents a slight increase in per capita income, which is now close to $900 per head for 4.6 million people. On the other hand, due to a combination of inadequate financial resources and a greatly overstretched public sector, social indicators such as health and literacy remain very poor, especially in rural areas. A weak education system, combined with poor communications and a dysfunctional electoral system, has generated many opportunities for corruption. Most of the country’s leaders have proved adept at seizing such opportunities, leading to chronic economic and political crises during the 1990s. The new government that took office in mid-1999 is making strenuous efforts to deal with these problems. But there remains a serious risk that Papua New Guinea could experience a steep decline in economic and social conditions. TRANSITION TO INDEPENDENCE Papua New Guinea is a nation of many islands and languages, with considerable differences in the infrastructure and skills of its 20 provinces and between rural and urban areas. Communication is difficult, even on the main island, due to rugged mountains and vast swamps. The transport network is not adequate to create an integrated nationwide market, let alone overcome deep cultural differences . Consequently, there is very little sense of nationhood and very few Papua New Guineans have the experience or incentive to work towards national, as against local or family, interests. The Constitutional and Legal Environment Papua New Guinea inherited, via Australia, a British constitutional and legal environment and parliamentary democracy. Basic freedoms are well established in the constitution drawn up just before independence. The judicial system has remained impartial, but the effectiveness of an understaffed police force has declined, contributing to growing law and order problems. Nevertheless, personal and property rights continue to be respected sufficiently for a market and contract-based economy to operate. Most land continues to be held under customary ownership, but that has not prevented those with access to decent transport from becoming involved in agricultural production for domestic as well as export markets. 322 Andrew Elek East Timor/final 29/7/01 6:23 PM Page 322 [3.147.42.168] Project MUSE (2024-04-26...

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