Development and Foreign Aid in Timor-Leste after Independence

Towards Dili harbour, 2018 (photo: David Webster)

By Laurentina “mica” Barreto Soares

State-building and development is a continuous process. Timor-Leste has been engaged in this endeavour since the restoration of its independence in 2002, following a period in which the United Nations helped lay the groundwork for institutional development from 1999 to 2002. Many have acknowledged Timorese development is a difficult process, especially given the fact that it started almost from scratch. Timor-Leste has achieved some remarkable progress. However, efforts so far have placed more emphasis on economic development than human development. This continuing focus is evident in the state budget allocation for the past five years, in which the bulk of funds have gone to infrastructure while allocating limited funds to other sectors—particularly agriculture, tourism, health, and education programs.

This leads us to ask: when we talk about development, what do we mean? What is development? Are we talking about cultural development, economic development, political development, or social development?

In 1996 the United Nations Development Programme defined development as a process that not only focuses on economic growth—although that is crucial—but also on human development, on health, education, and the environment. This is important because when most capitalist governments talk about economic growth, they do not necessarily emphasize what such growth means for the people.

During its attempts at state-building and development, Timor-Leste received foreign aid from multiple donors, including the Canadian government. The largest contributions came during the United Nations Transitional Administration (1999–2002) and the early years after independence in 2002. According to the local NGO La’o Hamutuk, from 1999 to 2009, donors gave an estimated US$5.2 billion to Timor-Leste. The major part of these funds, however, went to pay for the salaries of so-called international advisers and for other overhead bureaucratic costs; only one-tenth of it entered into the country’s economy. Donor contributions slowly decreased after 2009 due to donor countries’ changing priorities and perhaps also donor fatigue and Timor-Leste’s increased ability to generate its own resources. Despite reducing their assistance, a significant number of donors continued to engage in Timor-Leste. These included the European Union, the World Bank, the Asian Development Bank, United Nations specialized agencies, Australia, Germany, the United States, Portugal, and Japan. The People’s Republic of China is also among the current crop of donors to Timor-Leste. China’s assistance is comparatively small in quantity, but its presence and engagement is on the rise and it is seen, particularly by Timorese leaders, as a significant contribution to the country’s state-building and development efforts.

This chapter will focus on state-building, development, and foreign aid in Timor-Leste after independence. The first part will provide an overview of Timor-Leste’s development over the past fourteen years by highlighting some of the progress it has made and the challenges it has faced. The second part will discuss foreign aid and state-building with a focus on China’s engagement in Timor-Leste’s state-building and development. It will conclude by linking Timor-Leste’s development with reconciliation; given Timor-Leste’s past experience of atrocities committed by the Indonesian military between 1975 and 1999, as well as the internal crisis of 2006, these two aspects are closely linked.