East Timor : Policy Challenges for a New Nation

Abstract

The main challenge facing East Timor, is
 how to reconcile a simultaneous existence of acute poverty
 and severe shortage of human management skills, with solid
 prospects of future flows from the country's natural
 resource wealth. Policies to meet these two priorities -
 sustained poverty and sound management of natural resources
 - are the focus of this report. It looks at the pressing
 concerns of managing the economic transition from the United
 Nationals Transitional Administration in East Timor (UNTAET)
 within the next two years; at the issue of wealth creation
 and the need to enhance the private investment climate; at
 the need to devise a framework for saving the oil and gas
 revenues; at the importance of raising human development
 standards; at the limited number of qualified personnel able
 to formulate high priority development objectives,
 compounded by the need to build effective governance; and,
 at the overwhelming incidence of poverty in rural areas, and
 the strong correlation between consumption poverty, and low
 levels of education. In setting a strategy for growth and
 poverty reduction, the report highlights the importance of
 maintaining the prevailing efforts at raising farm incomes,
 and productivity, while improving the quality of rural
 education, and health facilities, including a tax policy
 vision that can play a role to avoid exacerbating urban
 bias. On improving the business environment, there is need
 for capacity building, and micro-finance programs, but
 within an adequate legal framework, and prudential
 regulations. The administrative priorities would require
 enhanced citizen monitoring on government performance, with
 an input in public services to improve transparency - which
 would emerge from an assessment of cost, effectiveness, and capacity.