Going for broke
Timor-Leste (East Timor) was once seen as the poster child for developing nations. It had natural resources, a comprehensive legal framework covering their extraction and an oil fund. Now, almost 11 years after attaining independence, the country better resembles a problem child.
UNLIKE other developing countries, Timor-Leste's challenge
is not earning revenue, but understanding how to spend it.
Despite having more than $12 billion stashed away in a
petroleum fund, as well as annual oil income which peaked in
2012 at $3.6 billion, the tiny southeast Asian nation could be
bankrupt by 2022. In 2005, its leaders were hailed by the
international community when, in a bid to stave off the
resource curse, they established an offshore sovereign wealth
fund. But symptoms of the curse have started to show. State
spending has surged, and based on present rates of increase -
the actual budget for 2012 was 28% higher than 2011 - is
unsustainable. Without adjusting for inflation, spending has
jumped 587% since 2007 - when the oil money really started to
flow - to $1.8 billion in 2012. If this trend continues, the
petroleum fund could be empty by 2020, warns...