Urgent Action Alert on East Timor Debt

April 2002


East Timor becomes independent May 20, the first new nation of the 21st Century. This follows the election of April 14, in which more than 86 percent of East Timor's voters turned out to peacefully cast ballots, 83 percent of whom opted for Xanana Gusmao for president. It was a momentous occasion, after all the years of violent conflict when the prospects for change seemed bleak. 

In 1999, in a shocking campaign of violence by militia groups that captured world attention, at least one thousand people were killed after an overwhelming majority of voters in a UN-sponsored election chose independence from Indonesia. Coming after the catastrophic loss of over a quarter of its original population in the years following Indonesia's 1975 invasion of the territory, the 1999 events devastated East Timor, with many thousands forcibly uprooted and much of the territory's infrastructure destroyed. Although progress in rebuilding has since been made with the help of international donors, the scale of the destruction was so great that much of East Timor, especially in the countryside, remains in ruins, with the vast majority of the mainly Catholic population unemployed. To say the least, international help remains sorely needed. At independence, East Timor will be one of the poorest nations in the world. 

The last thing that East Timor needs on top of all its many problems is to incur debt, which would only help prolong the cycle of poverty, but unless international donors are convinced otherwise, debt is precisely what East Timor will have. The projected budget shortfall for the first three years of independence, which is overseen by a consortium led by the World Bank, is as much as $62 million per year. With all the reconstruction that must still take place, East Timor should not be forced to take loans to meet this shortfall. An international donors group including the United States will meet in East Timor's capital on May 14-15, 2002 to decide future aid levels. The United States should take the lead by making a generous contribution, preferably at least 25 percent of this shortfall or more– at least $15 million annually over the next three years -- which would encourage other nations to maximize their own contributions. With the coming reduction of international peace keeping forces in East Timor, the United States will save considerable amounts, which could be pledged at the donors meeting in May. The U.S. should also work to convince other nations to help meet East Timor's budget shortfall with similar grants rather than loans. 

In the recent debates on foreign assistance, Treasury Secretary Paul O'Neill has argued that poor nations should be provided with grants, not loans that they would have difficulty repaying. East Timor would clearly qualify for such grant aid as it struggles to rebuild. Bishop Carlos Ximenes Belo has appealed for such help, stating that poverty eradication should be the main goal of East Timor's new leadership as well as that of international donors. Bishop Belo asks that future American aid for East Timor should be directed at creating jobs, especially for young people, and toward projects in health, education, environmental protection, refugee resettlement, judicial training and small business. 


Contact your Member of Congress and Senators, especially those on the House and Senate Appropriations Committees, urging them to press for an increase of at least $15 million per year over the next three years in U.S. assistance to East Timor, in addition to the $25 million authorized for FY 2002. Thus, ideally $40 million aimed at job creation, especially for the young, and for project in health, education, environmental protection, refugee resettlement, judicial training and small business.  

Write Treasury Secretary Paul O'Neill and Secretary of State Colin Powell, urging the most generous possible American contribution at the May 15 donors meeting and in the years to come, and urging them to work to convince other nations to do the same.