The Little Country That Wants to

The East Timor branch of Portugal’s Banco Nacional Ultramarino in Dili looks like a modern financial institution. It has a smiling receptionist, an unctuous guard and executives seated behind desks papered with documents. But don’t bother asking for a Visa card, a letter of credit or interest on any money you might deposit. The bank’s deputy director, Rui Peixe, can’t even extend home loans to deserving families.

“How do you expect me to extend mortgage loans when all the land titles are destroyed?” he asks with a sigh. “I’m working in a country that’s still writing all the rules. This is frontier banking.”

That East Timor even has an air-conditioned building that calls itself a bank is something of an accomplishment, given the fact that 80% of the country’s houses, government buildings and municipal utilities were destroyed two years ago after 78.5% of the population voted to secede from Indonesia. That remarkable act of democracy was followed by a paroxysm of hellish violence, during which 1,000 people died and 300,000 were driven from their burning homes by Indonesian army officers and their militia compatriots. When a United Nations peacekeeping force composed of Australians and New Zealanders arrived three weeks later, what once had been Indonesia’s 27th province lay broken, charred and silent.

This week, East Timor will hold another election. Under the fretful gaze of the U.N., qualified voters will go to the polls on Aug. 30 to elect a constituent assembly charged with writing a formal constitution. Once that task is complete, Timor will elect a new president and formally declare independence. Most Timorese hope the process will conclude by Nov. 28. That was the day in 1975 when the former Portuguese colony declared independence before being overrun nine days later by Indonesia.

This is the first time the U.N. has attempted to create a new country. To ensure success, it annually spends $563 million in support of a mission second in size only to the one administering Sierra Leone. The 11,000 soldiers and civilians who comprise the United Nations Transitional Administration in East Timor (UNTAET) accomplished a lot in two years. Peace has been restored and all but 40,000 refugees in Indonesian West Timor have been repatriated. There is a credible defense force, a functioning constabulary and an indigenous civil service ready to take over when the U.N.’s civilian workforce departs. “Even the harshest critics must be surprised that the United Nations has turned ashes and debris into a functioning state heading fast toward a democratic future,” boasts Sergio Vieira de Mello, the U.N.’s chief administrator.

Unfortunately, Timor’s success is by no means assured. The government that emerges from next week’s election will be an international mendicant that relies on foreign aid for two-thirds of its $65-million budget. Outside of Dili, the roads are crumbling and electricity is sporadic. In the isolated enclave of Oecussi, which the U.N. has made no attempt to rebuild, the situation is so bleak that some leaders believe the district’s survival will hinge on reintegration into Indonesia. How can the U.N. assume absolute control of a place without ensuring pure drinking water, regular trash collection or adequate transportation? “Because our job is to provide administration, not government services,” explains Peter W. Galbraith, UNTAET’s top-ranking American.

The difference between expectation and reality lies in the divide between $65 million--the amount spent rebuilding East Timor--and the $365 million that goes to employ, shelter and air-condition U.N. peacekeepers and bureaucrats. The international lifestyle long has been a source of resentment for Timorese living in Dili. Some worry the subdued anger could flare when foreigners begin to depart, taking with them all the U.N.-owned SUVs, computers and air conditioners that have been reserved for their personal use.

Ironically, the U.N.’s departure could hasten the redevelopment of Timor’s crumbling infrastructure. Under UNTAET, responsibility for highway maintenance and repair has been given to a battalion of engineers from Bangladesh who favor smudge pots and hazard tape over rebar and asphalt. Not surprisingly, roads leading from Dili into the interior often resemble those linking Chittagong with Dhaka. A shift to bilateral assistance will remove the U.N. bureaucracy and allow funds to go to experienced private construction firms.

For two years, the United Nations’ presence has masked the looming reality of Indonesia, a powerful neighbor that must be mollified if East Timor is to survive. Under recently deposed President Abdurrahman Wahid, Jakarta did little to disarm militias or reform its rapacious army. New President Megawati Sukarnoputri says she wants to expand the scope of an Indonesian human-rights tribunal investigating violence in East Timor, but her ability to control the army remains in doubt. Army leaders have denounced UNTAET’s decision to keep a “robust presence” guarding the border after the election. But it is exactly such a presence that could be the key to maintaining peace on the divided island.

One immediate act of good faith that would signal an improved relationship would be for Megawati to honor an agreement that was signed and immediately forgotten by Wahid more than a year ago. It calls for reopening the border separating East and West Timor to commercial traffic. The move would provide a market for Oecussi cattle ranchers and allow West Timor vendors to supply goods that currently must be shipped in from Java because of the 200% export tax arbitrarily imposed by the Indonesian military.

A recent study by the National Democratic Institute for International Affairs suggests that “there is significant fear [in East Timor] that multiparty political competition will lead to conflict and violence,” but most observers believe next week’s election will be peaceful. They are less sanguine, however, about the presidential race, which revolutionary leader Jose Alexandre “Xanana” Gusmao is expected to win. Xanana, like 1996 Nobel Peace Prize-winner Bishop Carlos Filipe Ximenes Belo, is a living icon in East Timor. But several recent business deals--one of them involving $2 million received for an illegal shipment of teak--raise questions about the type of government he might form.

East Timor’s new president won’t be strapped for cash. Offshore oil and gas reserves discovered and developed by Australia are expected to provide close to $7 billion in revenues over a 20-year period once a pipeline to Darwin, built by Phillips Petroleum, is completed in 2004. Shipped across the Pacific to a regasification terminal currently being developed by Phillips and El Paso Energy Corp., most of the 680 million cubic feet of natural gas produced each day will be sold to energy-hungry California.

One potential threat to stability is the generational divide separating the country’s Portuguese-speaking political establishment from the Indonesian-educated younger generation. Neither feels much kinship for the other, and existing differences are exacerbated by the presence of 1,350 Portuguese nationals, many of them teachers, who, having failed to get the escudo named East Timor’s national currency (that distinction belongs to the U.S. dollar), now hope to make Portuguese the official language.

The Portuguese deny their goal is to resurrect a colonial relationship. “We are here because of the heart,” explains Luis Miguel Ribeiro Carrilho, who heads the U.N. civilian police force. “We must repay our debt to history.”