February 1, 2012geopoliticscultureeconomics

Touching Timor Leste

"Just an Indian embassy, flying your flag on its rooftop, will give us the confidence we need." That was one of Timor-Leste’s key cabinet officials responding to a question on how India could play a role in the development of Asia’s newest democracy.

Published in the February 2012 The Lusosphere” issue of Seminar

From the time of independence to the end of the Cold War in the 1990s, India’s geopolitical imagination has been limited to the countries in its neighbourhood. The broad international orientation of the foreign policy of Jawaharlal Nehru, India’s first prime minister, eventually narrowed in focus to a preoccupation, often reactive, with affairs across India’s land borders. In the 21st century, engaging the countries of the subcontinent is no doubt necessary, but it is equally important for Indian civil society, businesses and government to understand that lands across the seas are neighbours too.

I had the opportunity to visit Timor Leste and study how India could contribute to that country’s development. This essay is a result of a research project supported by IDRC, Canada. The full report is here.

New Delhi’s Look East’ policy — initiated in the 1990s by the government of Prime Minister P.V. Narasimha Rao as a response to an economic crisis — resulted, by 2010, in India being an integral part of the East Asia Summit (EAS), the region’s pre-eminent high table. India is also a member of ASEAN+8, the ASEAN Regional Forum and has comprehensive economic cooperation with Singapore, Malaysia and Japan. India’s trade with ASEAN countries has increased from $30.7 billion in 2006-07 to $50 billion in 2009-10.1 India’s free trade agreement with ASEAN, signed in 2009, is expected to expand to include services and investment in the coming years.

In the words of Prime Minister Manmohan Singh, India sees the East Asian community as an arc of advantage’ across which there would be large-scale movement of people, capital, ideas and creativity.2 Today, despite a fresh impetus to relations with Indonesia after President Susilo Bambang Yudhoyono’s visit to India in January 2011, effectively New Delhi’s Look East’ policy extends only as far as Singapore. India must Look East beyond Singapore. To be an effective player in the EAS, India must deepen its bilateral economic engagements with all key countries and economies of the region. It must also be part of the security equilibrium in East Asia.

Just an Indian embassy, flying your flag on its rooftop, will give us the confidence we need.’3 That was one of Timor-Leste’s key cabinet officials responding to a question on how India could play a role in the development of Asia’s newest democracy.

Australia played an instrumental role in providing security after the violent tumult and socio-economic upheaval accompanying Timor-Leste’s separation from Indonesia. It still retains a military presence in the country and provides around $100m yearly in assistance. Australia also manages the natural gas fields that bankroll the Timorese government’s budget. Portugal, the former colonial power, retains disproportionate political influence. Despite criticism from international human rights advocates, the Timorese leadership has frozen the cases of crimes committed by withdrawing Indonesian military troops and their proxies. Timor-Leste’s relations with its giant neighbour, as a result, are not hostage to the terrible past.

China has made significant inroads into the country.4 In just a handful of years, it has built the presidential palace, the foreign ministry building, the defence headquarters and is now building staff quarters for the Timorese military officers. Even as Dili debates what kind of a navy the country ought to have, the Timorese government has already purchased Shanghai-class patrol boats. Some of these deals clearly constitute official Chinese assistance; others are the handiwork of resourceful businessmen disposing off surplus Chinese industrial and military equipment.

It is very hard for the government of a small country to say no’ to the foreign powers who have so much influence over its politics and economy. If it wishes to retain a degree of autonomy over its internal affairs, its best bet is to engineer a balance such that no single foreign power can dominate. The more removed a foreign power is from domestic and regional politics, the better. That’s why Timor-Leste’s political leaders want to see the Indian flag flying in Dili.

The balance of power in Asia is undergoing dynamic change. China’s rise can no longer be termed peaceful’, the United States’s ability and willingness to support its Asian allies is being questioned, and political tensions are on the rise among the countries of the region. In this context, the small and medium-sized countries of the East Asian region are likely to prefer a balance where no single power dominates over them. If they do not see this forthcoming, they are likely to join what they see as the stronger side. In effect, the importance they give to their relationship with India will depend on their assessment of whether New Delhi has the capability, and the will, to contribute to the Asian balance of power. India must therefore vastly increase its economic, diplomatic and military presence in and beyond South East Asia.

Currently, India’s assistance to Timor-Leste is in the following forms:5 annual grants for the purchase of equipment and materials related to socio-economic development; training opportunities for government officials under the Indian Technical and Economic Cooperation (ITEC); programme scholarships for undergraduate and postgraduate studies in India; training opportunities for diplomats in the Foreign Service Institute in New Delhi; duty-free tariff preference scheme; and grant assistance for the establishment of a pilot waste management project (done under an India-Brazil-South Africa initiative).

Major commercial activities in Timor-Leste involve Indian oil companies active in exploration activities in two oil blocs off the coast of Timor-Leste (one each in the EEZ and the JPDA). Indian companies are also exploring opportunities in IT and the infrastructure sectors. BASIX, a leading Indian microfinance institution, is providing technical assistance to Tuba Rai Metin, a Timorese microfinance institution supported by the United Nations and AusAID. A number of Timorese students are enrolled at Father Muller’s educational institutions in Mangalore, Karnataka.

Timor-Leste presents India with a good opportunity to construct and apply a model with an Indian touch’ in international development. According to Mukul Asher and Sushant K. Singh, India’s economic model and its approach to engaging (developing countries in Africa) is consistent with what former World Bank economist William Easterly, called searchers”. They, unlike, planners”, eschew global blueprints and seek to meet the demand of customers in a way that uses decentralized and customized approaches, while applying the existing stock of knowledge in a practical way to reduce resource costs and improve efficiency.’6

In his study contrasting Indian approach to development in Africa from China’s, Harry Broadman found that the Indian engagement generally involves private firms that are better integrated into domestic markets and overwhelmingly opt to hire local manpower even for managerial positions.7 The key features of this model are engagement and integration with grassroots communities, entrepreneurship and development of human capital. Combined with greater financial resources — grants and preferential loans — that the Indian government is allocating for assisting other developing countries, a coordinated approach could achieve disproportionate results. Timor-Leste, a country of just over one million people, with a median age of 22.5, a nominal per capita GDP of $542 and spread over 14,874 sq km, is well-placed to be the launch pad for such an approach.

Both sides have adequate financial resources for developing closer ties and there are economic opportunities to be availed. On the other hand, relations have to be built almost from scratch and barriers such as distance and language surmounted. The biggest hurdle, however, appear to be in post-conflict Timor-Leste’s low human capital base, which poses a major challenge to technology and knowledge transfers that form the basis of economic relationships. This is exacerbated by capacity constraints in the two governments, the foreign service in India’s case, and the civil service in Timor-Leste’s.

A focused approach centred around human capital development is in order. It involves a greater initial push and stewardship by the two governments at the early stages, but because it aims to jump over the biggest hurdle, it will fare better than a gradualist approach. The approach requires the Indian government to bring together a number of resources and competencies that exist in the Indian private and public sectors and, in consultation with the Timorese government, apply them on a small number of projects that have wide impact. These projects should be housed in or centred around an India Business Park outside Dili. Unlike the gradualist approach, an initiative like the business park is effectively impossible without the involvement of both governments.

According to President Jose Ramos-Horta, You don’t have embassies only because you have trade and other relations but because you need them some day.’ India does not have a diplomatic mission in Timor-Leste. Currently, the Indian ambassador in Jakarta, Indonesia is also accredited to Timor-Leste. This is in contrast to the United States, China, Australia, Japan and other major regional powers who have established diplomatic missions in Dili. India must establish a full-fledged embassy in Dili in the medium-term.

The UN Integrated Mission (UNMIT), which had helped bolster governance and security in the country for much of the last decade, is likely to start winding down in the near term. This will not only challenge the administrative capacity of the Timorese government to fill up the gaps, but is also likely to result in the international community losing active interest in the country’s security and development. The Timor-Leste government has applied for ASEAN membership and has a fair chance of joining the South East Asian grouping over the next few years. Even so, an attention deficit from the international community could result in political developments that are inimical to Timor-Leste’s development trajectory, as also to India’s interests.

An Indian presence in Dili will be a manifestation of India’s commitment to engage in East Asia and will have a significant signalling effect to the countries of the entire region. Unless India has strong economic and political ties with all countries of the region, New Delhi’s leverage in and benefits from participation in frameworks like the East Asian Summit (EAS) and related security architectures will be essentially limited.

India, already a regional maritime power, cannot afford to ignore Timor-Leste’s strategic location on the Indian Ocean, at the easternmost reaches of Asia. While bilateral economic ties are in their infancy at this stage, the estimated oil and gas reserves in the vicinity of Timor-Leste are relevant to India’s energy security goals.

Furthermore, it is in India’s interests to ensure that democracy takes firm roots in the newly independent country. A permanent Indian diplomatic presence is necessary in order for India to be in a position to shape favourable outcomes.

Ahead of that, in the short term, New Delhi should appoint a foreign service officer, charged with the responsibility of developing India’s relations with Timor-Leste. Administratively, the officer could report to the Indian Ambassador in Jakarta, charged with the responsibility of developing India’s relations with Timor-Leste. Also, to protect the interests of Indian nationals and businesses in the country in the immediate term, a suitable resident of Timor-Leste should be engaged as a honorary consul.

Upgrading India’s diplomatic presence in the short term is necessary to: (i) Provide consular and business facilitation arrangements to Indian nationals visiting Timor-Leste for business and tourism. (ii) Publicize commercial opportunities arising from the Timor-Leste government’s plans to redevelop the economy. These would range from translating and tracking government and large commercial tenders, to ensuring that Indian companies are treated fairly and on par with those of other countries. (iii) Organize and participate in trade missions. (iv) Upgrade defence and security cooperation. (v) Provide focus, stewardship and high-level management of India-initiated development projects, both existing and those proposed in this report.

The Indian government, in partnership with the Timorese government, private sectors of the two countries and international development agencies, should establish a business park outside Dili. Such a project is feasible, tangible, meaningful and can become a focal point of the Indian development touch in Timor-Leste. Both the Indian government and private sector entities have almost two decades of experience in building and managing technoparks’ — special one-stop facilities that make it easy for entrepreneurs to start and grow their businesses in a context of complex rules and risky politico-economic environments. India should create a similar facility, but targeted at a broader range of business activities, in Timor-Leste, preferably outside Dili.

The park should be jointly owned by the two governments. They should jointly appoint a nodal agency for project implementation by selecting an appropriate Indian infrastructure development and management company to establish the park, on a Public-Private Partnership (PPP) basis. This could be in the form of a renewable 15 year build and operate contract.

To promote entrepreneurship, the park should be open to a wide range of business and commercial activities, and remain technology agnostic. It should be open for any commercial activity with wider spin-offs for Timor-Leste’s society, and not only those which are technology-oriented or export-driven. It is recommended that the two governments consider the following areas to focus on initially: training and education services; engineering services, including automotive maintenance and repair; food processing; handicraft and eco-friendly cosmetics/home products; and IT and computer services.

The park must provide security, electricity, water supply, telecommunications facilities and situated such that it has easy access to highways, sea and airports. Given the prohibitively high cost of communications, the park could replicate the Software Technology Parks of India (STPI) model, wherein the telecommunication services for the occupants of the park are provided by a specially licensed entity. The park could lease telecommunications capacity competitively from a number of Indian, Indonesian or other South East Asian satellite operators. Making telecommunications affordable is a critical factor for success.

With encouragement and support from the Indian government, the park operator should bring together a number of important ancillary services like banking, trade facilitation, trade credit, health care, technology, language and skills development institutes should be co-located within the park. Indian banks (including Exim Bank), microfinance institutions, micro-marketing and rural development facilities should be housed in the park.

The park could serve as a pilot case for the systematic sharing of India’s development experience with other countries, focusing on knowledge interventions. For instance, making Indian television programmes like selected episodes of Krishi Darshan, dubbed in Tetum or Bahasa Indonesia, could have a disproportionate impact.

The park operator’s performance indicators should include both the number of local entrepreneurs who set up their businesses in the facility as well as the number of Indian companies that establish a presence there.

Over the last decade, India has increased its foreign aid outlays from $100m to well over $678 million in grants. India has also set aside $500m for lines of credit to least developed countries. This aid is disbursed by the Ministry of External Affairs and channelled through Indian missions in other developing countries both in India’s neighbourhood and beyond. To ensure that these growing outlays translate into desired outcomes, the MEA should set up an International Development Agency (InDA) to spearhead developmental initiatives.

It should be assigned an initial budget of $1 billion and increased at an annual rate equivalent to (at least) the growth of the Indian economy. This implies an effective doubling of the current outlays of financial assistance to foreign countries.

Tasking InDA with developmental responsibilities will allow embassy officials to focus on the traditional task of diplomacy, while allowing appointment of development specialists to maximize the impact from India’s foreign aid outlays. The shortage of foreign service officers is unlikely to ease in the coming years. Leveraging on the talent available in India’s private and non-profit sectors through InDA reduces the constraints posed by this shortage, which today are binding.

The existence of an InDA allows India to operate on developmental and humanitarian grounds in countries where diplomatic relations might not be normal or warm.

InDA’s activities around the world, especially if they successfully involve NGOs and the private sector, could help pave the way for the Indian media and civil society to take a greater interest in foreign affairs. This will not only improve India’s engagement with the world by making it more holistic, but such interactions are likely to be mutually beneficial.

Administratively, the InDA should dovetail into the existing organizational structure of the MEA, with its chief executive reporting to the Foreign Secretary and its country heads to the respective ambassador/head of mission. In addition to MEA personnel, InDA must have relevant officers from the ministries of finance, commerce and defence both at leadership and staff levels.

Currently, developmental objectives are, perhaps rightly, not key performance indicators for India’s ambassadors and chiefs of missions. All of India’s international development initiatives must be placed under InDA’s aegis and the management of InDA made accountable for outcomes.

Given the ambition and complexity of InDA’s vision, it is prudent to pilot it in a few small locations to refine its mission, strategies and organizational capabilities. Timor-Leste, being a small, conducive and at the furthest reaches of the Indian Ocean, offers an ideal test case for InDA. It is much easier, administratively, to consolidate a number of small projects, in a setting that does not require injection of large amounts of financial assistance, and explore how the Indian model of international development can be shaped.

In the medium-term, Indian initiatives in Timor-Leste must be taken over by InDA. In addition, India’s international development profile can leverage on its unique strengths by investing resources in the area of community governance development.

Establishing formal governance institutions from the community/grassroots level to the national level is important if developmental initiatives are to succeed. In recent years, there has been a large-scale NGO-ization of international development, which without appropriate investments in improving state functions, leads to a widening of the governance gap.

The early 21st century is witnessing a grand competition of models and narratives as it is seeing a contestation for power. India’s experience with economic growth within a democratic context, developing human capital, sustaining institutions of governance, however imperfect, is valuable and can benefit other developing countries. Transferring this experience will not be easy and is highly context specific. It is, however, a project that India could undertake.

So, why can’t India put its flag on a rooftop in downtown Dili? One reason is that we do not have enough foreign service officers. Yet with some creativity, some flexibility and greater policy stewardship, India’s foreign policy can do much more.

**

Footnotes:

**

  1. BBC, India and ASEAN Aim to Boost Trade’, http://www.bbc.co.uk/news/business-12630418, accessed on 4 March 2011.

  2. Manmohan Singh’s speech at the Third India-ASEAN Business Summit, New Delhi, 19 October 2004.

  3. A cabinet level Timorese official in an interview with the author. Dili, 24 November 2010.

  4. See Ian Storey, China’s Inroads into East Timor’, China Brief 9:6, The Jamestown Foundation, http://is.gd/59K2zD accessed 15 March 2011.

  5. Interview with Ambassador Biren Nanda, Indian Embassy, Jakarta, 6 October 2010.

  6. Mukul Asher and Sushant K Singh, India’s New African Safari’, Mint, 24 April 2008, http://www.livemint.com/2008/04/24231031/India8217s-new-African-safa.html accessed on 10 December 2010.

  7. Harry Broadman, Africa’s Silk Road: China and India’s New Economic Frontier, World Bank Report, 2006.



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