East Timor joins International Monetary Fund and World Bank

11.45am

WASHINGTON - Newly independent East Timor became the 184th member of both the International Monetary Fund and the World Bank after its prime minister signed agreements with both lenders on Tuesday.

The move will help East Timor tap more foreign aid to build its tiny economy, where the annual budget, excluding international aid, amounts to just $137 million.

East Timor, which gained independence in May after years of occupation by Indonesia, was wracked by violence in 1999 when its people voted to split from Indonesian rule in a UN-sponsored ballot in 1999. More than 1000 people died at the hands of pro-Jakarta militias, backed by the Indonesian military.

Those events caused the economy of less than 1 million people to almost totally collapse as a third of its population was displaced, buildings were destroyed en masse, banks looted and the coffee-exporting agriculture sector disrupted.

"Today's events, marking East Timor's membership in the IMF and the World Bank, represent another decisive step in the process of nation-building," IMF Managing Director Horst Koehler said in a statement after a signing ceremony.

"East Timor is claiming its place as a respected member of the global community of nations."

But, noting East Timor is one of the world's poorest nations with a large part of its citizens living on less than US55c ($1.15) a day, Koehler said the challenges ahead to boost economic prospects were myriad.

"Today is a very important day for us and a very historic day," Prime Minister Mari Alkatiri told a news briefing after signing agreements with the IMF and World Bank.

Alkatiri said among the challenges facing his administration were to build an economy that would not be overwhelmed by windfall oil and gas revenues, set to start at about US$70 million annually in 2004 before rising to as much as US$300 million in the following years.

He said his government would seek to build sustainable fishing, agriculture and tourist sectors, noting that the tiny state has some of the best scuba-diving waters anywhere.

Since 1999, the IMF has offered technical advice to the former Portuguese colony, helping it create a ministry of finance, put in place an institution to pave the way for a central bank and build basic government statistics.

Meanwhile, the World Bank has administered a US$170 million trust fund aimed at helping East Timor build its infrastructure without building up debts immediately.

"East Timor's reconstruction and political transition since 1999 has been a great success, with a quicker-than-expected recovery, a positive economic outlook, and prospects of future oil revenues," said Jemal-ud-din Kassum, World Bank vice president for the East Asia and Pacific region.

"But the challenges ahead are immense," Kassum added, noting two in five there live below the national poverty line of 55 cents a day.

Since voting for independence in 1999, the international community has pledged hundreds of millions of dollars to help rebuild the nation, and Australia has agreed to give East Timor a greater share of future revenues from oil and gas fields in the Timor Sea than was provided for under an earlier deal with Indonesia. That deal could net the tiny economy billions of dollars over the next 20 years.

- REUTERS

Feature: Indonesia and East Timor

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