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

Hill, Hal and Joao M. Saldanha (eds). East Timor: Development Challenges to the World's Newest Nation. Singapore: Institute of Southeast Asian Studies, 2001, pp. 382.

The volume's theme is how to meet the challenges of transition from poverty, violence and terror towards a tenuous pursuit of economic viability with a civil state construct within a new country (East Timor). The country is undertaking economic restructuring and transition under the guidance of the United Nations Transitional Administration in East Timor (UNTAET). Xanana Gusmao, one of the contributors to the volume, points out that in East Timor "...the main goal of our development will be to create a fair society with an equitable distribution of income in which East Timorese with lower incomes have their basic needs met... We aim for stability through democratic and orderly elections, and for good governance with no corruption and with transparency in the decision-making process." (p. xvi)

The editors who are joined by twenty other scholars contribute collectively 21 essays dealing with various aspects of nation building. Their specific foci include efforts to improve the management of the country's macro economy, improve international economic relations, develop the agriculture sector and the rural economy, strengthen economic institutions and social policies and improve banking and finance. The co-editors note that two external factors would continue to be key to whether the new nation would be successful in its development efforts. First, an important element of East Timor's future has to do with managing relations with Indonesia. While the book's focus is on economic issues, "...the relationship is about much more than trade and commerce. East Timor will need to forge a practical partnership while also managing the complex political issue of reconciliation, and legal action against elements of the Indonesian military who perpetrated ...human rights violations in 1999." (p. 22)

Second, bilateral and multilateral official development assistance (ODA) must continue to be forthcoming. On this score, Paul Collier observes that: "(T)he East Timorese government needs a sense of which donors are likely to be present only during the post-conflict recovery and which will stay. Temporary aid should not be used to lock the government into expenditures that need to be sustained...Having decided how much aid is likely to be forthcoming in the long term, the government needs to decide its uses." (pp. 337-338) This latter observation is important because, "To the extent choices are determined by donors, the specify projects and negotiated public expenditure programs." (p. 338)

East Timor's difficult tasks are to forge a supportive accommodation with Indonesia and gain access to fungible ODA. Fungible finance refers to the fact that official assistance can replace domestic revenue collections thereby freeing up locally derived funds for alternative expenditures on both consumption and investment. However, ODA and locally funded capital investments give rise to longer-term recurrent cost obligations because capital projects require operation and maintenance. A careful evaluation of longer run recurrent costs and East Timor's fiscal capacity to meet them is critical to the success of investment projects, a point that might have been more extensively covered. While it is touched upon, the possibility of recurrent cost obligations growing beyond government's fiscal capacity to meet them risks reducing potentially useful physical and social infrastructure projects to monumental junk piles, a phenomenon all too familiar to African governments and the donors who "assisted" them. The volume is extremely insightful, useful and both well written and extensively researched. Its contents will be particularly interesting to responsible officials and scholars whose regional interest focus is Southeast Asia and/or whose broader concerns are with economic development, transition, democratization and modernization issues within the context of nation building.

Robert L. Curry, Jr California State University Sacramento

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