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Concerns raised over East Timor's spending
After a decade of independence half of East Timor's population still live in poverty.

The young nation of East Timor has quickly built up a bank of petrodollars thanks to rich oil and gas reserves.

Almost a decade after independence, however, about half the population still live in poverty.

How to use oil and gas revenue to develop the economy is an issue dominating East Timor's current presidential election.

Sara Everingham reports from Dili.
SARA EVERINGHAM, REPORTER: The centre of Dili is being rebuilt. The multi-million dollar Timor Plaza is the first stage of a major shopping and entertainment and hotel development by the Timorese-Australian Jape family.

ALAN JAPE, JAPE GROUP: We invest here, the main thing we bring here is the confidence to the place.

SARA EVERINGHAM: It's a first for the impoverished nation of East Timor.

But the Jape family is banking on this country having a peaceful and prosperous future and a growing middle class.

ALAN JAPE: My father's already 85 and he thinks that there is a need for us to come back to help to rebuild the country. That's the main thing. Obviously, there's some business opportunity as well here.

SARA EVERINGHAM: East Timor has one of the fastest growing economies in the region. The country's petroleum fund, made up of revenues from oil and gas, reached $9 billion last year. And East Timor's been dipping further into it in a bid to spend its way out of poverty.

The International Monetary Fund says the extra government spending is helping grow the economy, but it is also contributing to double digit inflation which is making it harder for many people to buy even the basics.

CHARLES SCHEINER, DEVELOPMENT MONITORING NGO: If you walk around Dili, you see a lot of nice houses that were recently built, you see a lot more private cars than used to be here. That's the richest 1 per cent of the population, and they're doing okay.

(Speaking to an employee) One of the things we need to find out, figure out a way of help people understand it.

SARA EVERINGHAM: Charles Scheiner is a researcher with the non-government organisation which closely monitors how East Timor's government is spending the revenue from its reserves of oil and gas.

CHARLES SCHEINER: Roughly 70 per cent of the population that's not in the formal economy, that doesn't get a salary at all, that eats the food that they grow and maybe has a little bit extra to sell. Their situation is getting worse because the few things that they have to buy, the prices are going up very high; the costs of everything that they do is more expensive and they have no increase in their income.

SARA EVERINGHAM: Poverty and unemployment have been hot topics in East Timor's presidential election, including for the two men left in the race for April's second round of voting.

World Bank figures from 2009 show 41 per cent of people in East Timor live in poverty.

With around half East Timor's population under the age of 25, job creation is looming as a critical challenge to the country's ongoing stability.

In the past, a lack of economic opportunities has helped create a breeding ground for unrest.

PAUL CLEARY, FORMER EAST TIMOR GOVERNMENT ADVISER: So that's why I think the absolute priority at the moment should be to be using that money to generate jobs, to generate sustainable and labour intensive industries and to really give people a future. Because without that, I think Timor is still a very fragile nation.

SARA EVERINGHAM: East Timor's Government is trying to do just that. It's budgeted to spend just over $1.5 billion this year, 28 per cent more than last year, as part of a plan to keep the economy growing until East Timor becomes an upper middle income nation in 20 years.

EMILIA PIRES, EAST TIMORESE FINANCE MINISTER: We don't want to look at the oil and gas as be all, end all. It is more like a tool, an instrument to stimulate the non oil, the other sector economy; and that's what we're trying to do.

SARA EVERINGHAM: Much of money is being spent on infrastructure, including fixing up the rugged roads.

EMILIA PIRES: Without the roads, children cannot get to school; doctors cannot go and get to the patients.

SARA EVERINGHAM: But there are concerns East Timor is spending well beyond its means.

One of the Government's major projects is rolling out electricity to more parts of the country. But cost blowouts have led to questions about the young nation's capacity to get the spending right.

PAUL CLEARY: The big challenge for Timor is to make sure that the money it does spend it really does generate economic growth and generate jobs. Whereas a lot of these large scale. capital intensive projects like the power plant, is an example of one where nearly $1 billion has been blow on a project which I think is really dubious.

SARA EVERINGHAM: East Timor's Government says it is introduced measures to minimise the risks of big spending, including a new Anti Corruption Commission.

ALAN JAPE (Talking to assistant) What's his name booking already come in tomorrow or something?

SARA EVERINGHAM: At the Timor Plaza the Jape family acknowledges this development is a work in progress. 30 per cent of shops are still empty.

ALAN JAPE: They do need to have investment, investment creates the job opportunities, you know, so it is good for the country.

SARA EVERINGHAM: But the Japes say they're patient investors and they say the Timor Plaza is an important sign this young nation is open for business
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