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Friday, October 29, 1999 Published at 09:51 GMT 10:51 UK

World: Asia-Pacific

No short cuts for East Timor recovery

East Timorese face a long road.

By business reporter Manuela Saragosa

The United Nations' international appeal for almost US $200m aimed at getting East Timor's battered economy back on its feet is just the start of a project which will involve building a new state and economy from scratch.

East Timor is one of the poorest regions in Asia, with few developed natural resources and little industry to speak of.

The economy generated only about $100 per person last year and under Indonesian rule much of the country's public services were financed by the government in Jakarta.

Coffee has traditionally been the territory's biggest export along with some limited sales of marble.

Destroyed infrastructure

But anti-independence militia, who went on a violent rampage after the overwhelming vote in favour of independence at the end of August, destroyed much of this year's coffee crop, along with most of the country's schools, hospitals, water, power, transport and communication facilities.

Encouraging tourists to visit East Timor's pristine beaches and rugged interior was once an economic ambition. Without infrastructure, that has now become a development dream.

[ image: Maybe tourists will come too]
Maybe tourists will come too
In this the UN faces an unprecedented challenge.

In Gaza and Bosnia, for example, there was some basic infrastructure to build on. In East Timor, one of the UN's first tasks will be to work with the East Timorese to create a political and legal system strong enough not only to reconcile this shattered society, but also to create a stable environment conducive to private investment.

East Timor's independence leader, Jose Ramos Horta, has stressed he does not want his country to fall into the foreign debt trap.

At the moment, East Timor has no central bank, no currency of it own, no functioning civil service, and no official language.

Portugal, East Timor's former colonial ruler, has offered its currency, the escudo, as a transitional solution. But some analysts question the financial logic of introducing a currency tied to the economies of faraway Europe.

In the meantime, the Indonesian rupiah is still widely used and US dollars are also accepted for larger transactions. There is no doubt, however, that to operate an independent economy, East Timor will need its own currency.

[ image: Country will rely on foreign handouts for some time]
Country will rely on foreign handouts for some time
Besides developing the agricultural sector, an obvious source of revenue for East Timor's eventual government would be the Timor Gap, a stretch of seabed rich in natural gas which runs from the country's coastline to neighbouring Australia.

But gaining access to it may be fraught with legal difficulties as a treaty to explore and exploit the area was signed between Indonesia and Australia in 1989. What's more, the Timor Gap's gas deposits are so deep beneath the seabed that it is still a question whether drilling there is worth the investment.

For the time being East Timor's fledgling economy will depend on the generosity of the international community.

How much will be needed and how the money will be allocated will become clearer once a World Bank and International Monetary Fund delegation, currently in East Timor to discuss reconstruction projects with UN officials, completes its visit.

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