Every week, Manuel Mendonca travels the dubious roads around East
Timor's jagged peaks and valleys on a mission: to tell his fellow
citizens about the wave of oil money that will soon crash upon the
shores of the world's newest nation. He's the government's one-man
public-relations band, educating a largely rural population in
Asia's poorest country about the complex issues involved in becoming
"Timor Sea oil is very important for our country and our future,"
says Mr. Mendonca. "People need a clear explanation so they can
understand what the government has already done for this country,
and what else it proposes to do. It's a great satisfaction for me to
In between East Timor and Australia lies a series of lucrative
oil fields in the Timor Sea, some actively pumping, others still in
the planning phase.
One of them, Bayu-Undan, is expected to yield more than $3
billion over the life of the project, estimated to last about 20
years. This revenue will significantly change the face of a country
that currently generates only around $25 million annually from local
resources, mostly coffee.
Almost two years after the UN handed power over to the first
elected Timorese government, following decades of Indonesia's
authoritarian rule, East Timor remains the poorest nation in Asia
and one of the very poorest in the world, with the average citizen
earning about 55 cents a day.
The local economy is largely propped up by the international
donor community, but East Timor now competes for aid dollars against
larger and more immediate global hotspots like Iraq and Afghanistan.
Oil is East Timor's best hope for true economic independence,
Oil is often a two-edged sword. Along with a windfall, places
like Nigeria, Venezuela, and Angola have faced unrest and
corruption. Some experts say East Timor's fledgling democracy may
have trouble handling the challenges of oil development.
"The problems East Timor faces are much the same ones facing any
oil-rich developing country, with the added problem of new
institutions and a democratic polity only in its first years," says
Benjamin Smith, an expert on extractive industries in developing
countries. "Unless a way can be found to insulate the use of oil
revenues from the incentives inherent to politics, it is difficult
to foresee the revenues having a net positive impact."
The government is taking steps toward safeguarding the funds. "It
is essential to recognize that oil and gas revenues are, for the
foreseeable future, East Timor's principal government revenue," says
Ron Isaacson, deputy director of the World Bank in Dili. "The
government of East Timor is determined to save much of its oil and
gas revenues such that future generations can benefit as much as
Exactly how much money will actually come to East Timor as a
result of the Timor Sea oil is not clear right now.
East Timor's leaders, to their credit, have been studying the
lessons learned from other petrostates and say they are determined
not to let their country stumble down the same rocky path. Shortly
after full independence in May 2002, Prime Minister Mari Alkatiri
created the Timor Sea office, charged with bringing information
directly to the people because of the country's limited
"Timor Sea issues are of significant importance to our future and
the future of our children. The Timorese people deserve the right to
know how the government is managing their future and deserve our
assistance in explaining what difficulties we, as a nation, face,"
Mr. Alkatiri says.
Alkatiri also supported British Prime Minister Tony Blair's
transparency initiative for oil-producing nations, meant to insure
better accountability of oil revenues once revenues begin to pour
Alkatiri's personal commitment to openness was tested recently
when a small American-Portuguese oil company filed a $10. …