Summary of 2012 OGE Debate in Generality Day Three- 11 November 2011

On the third day of Plenary Session Debate on the 2012 OGE (General Budget of State), 11 November 2011, Members of National Parliament across the political benches discussed various questions and comments surrounding the 2012 which were responded to by the Government through the Prime Minister and other concerned ministers. The discussions centered on the following issues:

•  Macro economy-

Some parliamentarians pointed out that the “double digit” economic growth as claimed by the Government does not provide any positive impact on the life of the people as many people are still living in bad conditions. The high inflation and the high price of goods have featured the volatility of TL economy that is reliant on import of foreign goods; and the use of the US dollar that has been devaluated against major currencies of more advanced economies in the world during the past few years have caused domino effect in TL such as low purchase power of vast majority of people, unemployment, and ultimately high poverty.
The Minister of Finance explained that the estimation of double digit economic growth is the result of a careful study of the MOF Macroeconomic staff in conjunction with and approved by the IMF. Meanwhile the Inflation and high price are mainly caused by external factors not only the devaluation of the US dollar against other currencies but also the import of goods which the price is determined by the commercial partner (exporting country).

•  Budget allocation for key sectors: Education, Health and Agriculture-

Some parliamentarians criticized that the budget allocation for the three key priority sectors has gradually decreased over the past years, particular during this OGE, which they clam will demonstrate the lack of attention given by the government to them and contradicts with this Government’s initial commitment. Further, some also alleged that the Government prefers investing in mega projects which are beyond their capacity to execute and will end up in misuse of lots money. Other argued that the Government neglected the most fundamental sectors that are the pillars of development of any government across the world. As a result, they cited a recent study of UNDP on HDI, the ranking of TL has decreased from 120^th to 147^th. Some parliamentarians claimed that the country will pay serious consequence including the less competitive future generations as comparing to other countries who are investing much more in these sectors.
The Government denied that the budget allocation of the key sectors identified had decreased. In terms of its nominal figure, the education budget has increased from time to time, and that the education sector has achieved significant progress such as the net enrolment rate by more than 90%, law on basic education, eliminated illiteracy throughout the country, etc. The Government also pointed out that the increased budget for infrastructure cross-cutting projects is in support of these key sectors. From experience, without an improved infrastructure, the services in these three sectors cannot be delivered properly.

•  MDGs suco housing

Some parliamentarians disagreed with the MDGs housing in aldeias  and sucos program of the Government and argued that the project run by foreign companies with pre-fabricated houses in sucos are totally inconvenient. And that the project is only benefiting foreigners not only in terms of materials but also lots of capital that will fly out of the country and consequently, neglecting the local private sector capacity. Some other claimed that pre-fabricated houses will cause cultural shock and conflict of preferences, and will result in a lot of other problems.

The Government explained that aside from speeding up the achievement of one of the MDGs requirements which is housing, the project is also aimed at protecting the environment, i.e. if the project is implemented by locals, they will cut trees and definitely damaging the nature. The Government presented to the parliamentarians the design of the housing with various types of houses that are equipped with indispensable modern facilities such as: toilet, kitchen, bedrooms, etc.

•  CITL- Companhia de Investimento de Timor Leste (TL Investment Company)

Some parliamentarians disagreed with the allocation of a big budget of $200 Million for CITL because it is still new and has no capacity to run the company yet it is given a huge responsibility to deal with high-tech submarine cable, and other strategic roles.
The Government explained that the CITL’s establishment is strategically a “no option”, long term approach. The company will be supported with initial share of $200 M aimed to run the company starting with sophisticated project of submarine cable network linking to the rest of the world. Later, it is expected that other strategic investment programs will be defined once the organization’s structure is firmed up.  The Government also reported that several foreign companies have already signified their interest to cooperate in the submarine cable project, though the government has yet to make its final decision on the project.

•  Public debt- borrowing

Some parliamentarians disagreed with the borrowing of only $33.1 M as it is a relatively small amount of money and to them, unnecessary taking into account that the country has money in the Petroleum Fund (PF) sitting in US Treasury Bonds. They argued that it is better to efficiently utilize the country’s own money rather than resort to borrowing money that will burden the future governments and generations.
The Government explained that the borrowing of $33.1 M is according to studies from potential lenders. TL is eligible to borrow up to $200 M. In addition, according to studies by foreign agencies, the interest rate of borrowing for TL will be very low  - only 1.2%, thus, affordable to be paid back within the grace period of 5-10 years. Interested borrowing agencies are JICA, ADB, Exim-Bank (China), and World Bank. The strategic roads networks have been decided between the Government and the borrowing agencies. The money will be solely used on infrastructure, i.e roads network connecting to the potentially industrial and economic areas such as: Dili-Liquica-Ermera; Dili-Manatuto-Baucau; Manatuto-Natarbora. The borrowed money will be paid back with the economic returns expected from these roads.

•    Other issues raised in the session were:

PPPs (Public Private Partnerships)-
Some parliamentarians are of the view that due to weak management in the government and the lack of capacity of companies, PPP will only be burdening the public money because it will just enrich government members and its preferred allies.
 The Government explained that PPPs is a strategic approach and aimed at strengthening the capacity of private sector so that in due time, they can better contribute in the development of the country. The Government reiterated that the establishment of CCI (Chamber of Commerce and Industry) is a tangible evidence of its commitment to build the private sector and a recognition of their capacity and important role in the development process.
 Management-
Some parliamentarians claimed that the management of the Government in all sectors is weak, particularly in project management. They cited the experience with AND, Procurement Commission and several line ministries as examples of lack of managerial capacity, and have caused lots of problems.
The Government recognized the weaknesses in management but allayed the apprehensions of the parliamentarians by highlighting the Government’s strong commitment to cope with it as evidenced by the reforms and setting up proper systems and agencies to address the issues raised on these agencies. Among some, the Government cited the increased use of FreeBalance system within the Government, the Transparency Portal, eProcurement Portal, the CAC, Strengthening of the IGO, etc. The Government likewise assured the parliamentarians that the AND, despite being a new structure,  is staffed by young and dedicated people who have strong commitment to look after the welfare and interest of the country.

•  Revenues –

Some parliamentarians viewed that the Government is not creative in exploring more fields of raising domestic revenues and have also lose of control of the potential areas of domestic revenues. As a result, these parliamentarians claimed that the Government is just relying on the PF revenues to finance the OGE.
The Government answered back that the data shows that domestic revenues have increased over to time.
After interventions from the political benches, the plenary voted the Proposal N.52/II to approve the OGE 2012 in Generality as follows: In favor 37 (AMP+ PPT), against 19 (Fretilin) and abstain 3 from KOTA and PUN.