Chinese investments in Timor-Leste: An Update
Timor-Leste, also known as East Timor, is an island country located between Oceania and Southeast Asia. It occupies the eastern part of the Timor Island which is the largest and the easternmost island in the Lesser Sunda Archipelago. The western part which is known as West Timor is a sovereign territory of Indonesia. In addition to the east side of the Timor island, Timor-Leste is also comprised of ‘Oecussi-Ambeno’ which is an exclave surrounded by West Timor. The capital city, ‘Dili,’ is the largest port of East Timor which is located on the North-Eastern part of the country. The country is separated from Australia by the Timor Sea. The Timor Gap, which is a part of the Timor Sea, is a disputed region between Timor and Australia due to the presence of oil and gas reserves in the area.
East Timor has a long history of imperialism. Portugal occupied the Timor Island in 16th Century and ruled it till 1975. After gaining independence from Portuguese the country was annexed by Indonesia in the year 1976. The country finally got independent in the year 2002 after the struggle of nearly two decades and intervention of the UN.
Economically, East Timor is struggling and ranks low on GDP index. In the Human Development Index (HDI) report of 2018, the country stood at the 131st position. Its economy is still mainly driven by oil, coffee and sandalwood. Agriculture activities still employ the majority of the population with roughly one-fifth of the entire population engaged in the production of coffee, directly or indirectly. Other than the agricultural activities, small scale manufacturing industries like garments, textiles, handicrafts, pottery, ivory and wood carving and basket making are also very common. Majority of its imports are from the neighbouring country, Indonesia, which is followed by China. The country exports majority of its commodities to Indonesia, followed by the US and Germany.
Timor-Leste’s geostrategic location in the Indo-Pacific has made the country an important factor in the politics of the Southeast Asian region. It is strategically located at the confluence of the Indian and the Pacific Ocean. With the recent shift of the power centre from the Atlantic to the Pacific Ocean, the importance of the island country has increased exponentially. The major powers of the world have been constantly increasing their engagement with Timor-Leste which has opened the Pandora-box of opportunities for the newly formed nation.
China’s Relations with Timor-Leste
China’s relation with Timor-Leste dates back prior to its independence. China even tried to help Timor-Leste militarily in its struggle for independence with arms and men but due to the Indonesian naval blockade, the assistance never reached the Timorese. China was also the first country which established diplomatic relations with Dili after it gained independence in the year 2002. Beijing has been investing in the country heavily in various sectors like real estate, hotels, groceries, hospitals, telecommunications, and many other sectors. Beijing also financed the construction of the various important buildings such as the Foreign and Defence Ministries, the Presidential Palace, the Defence Force Headquarter and Timor-Leste’s embassy in Beijing. China has also been providing funding for infrastructure development through its ambitious ‘Belt and Road Initiative’ (BRI). Dili has also signed the Memorandum of Understanding (MoU) on the BRI which makes the country eligible for the funding of the various infrastructure projects.
In 2017, Timor-Leste became the member of the Asian Infrastructure Investment Bank (AIIB), which is headquartered in Beijing and has China as the largest stakeholder, which brought the two countries further close to each other. Timor-Leste is also looking for Chinese aid for the Tasi Mane project which is an infrastructure project on the southern coast of the country. Tasi Mane project is named after the Tasi Mane Sea which is located between Australia and south coast of Timor-Leste. The project is envisaged to be built in the municipal towns of Manufahi, Suai and Viqueque. “The multi-year project of three industrial clusters on the south coast will form the backbone of the Timor-Leste petroleum industry. It will involve the development of a coastal zone from Suai to Beaço to support a growing domestic petroleum industry. Tasi Mane will include the Suai Supply Base (SSB) cluster in Camanasa, the Betano Refinery and Petrochemical Industry cluster, and the Beaço LNG-Plant cluster. The government plans to use a total of 1,113 hectares of community land.”
The project includes the construction of an “international airport, seaport, shipbuilding facility, and ship repair facilities” as well. All these facilities and the projects will be located in Suai, at the southern coast of Timor-Leste and have an approximate distance of around 430 miles from the famous Darwin port of Australia, which is managed by the Landbridge Group; a Chinese company under the 99-year lease. The development of this port will certainly help Beijing to increase its presence and surveillance activities in the Indo-Pacific, which will serve its geopolitical ambitions and strategic positioning.
Beijing is also assisting Dili in development of highways all across the country. Recently, China Harbor Engineering Company (CHEC) has also started the construction of the deep-water port of Tibar in Timor-Leste. The total cost of the project is worth US$490 million. Phase I of the project is expected to be completed by September 2021. After that, the French firm ‘Bollore’ will operate the port.
For Beijing, close association with Dili helped in the rejection of any sort of representation of Taiwan in the country. Also, in 2014, a joint statement was released by both the countries which stated that: ‘Timor-Leste is opposed to any form of “Taiwan independence”, and will not establish any form of official relationship or conduct any form of official contacts with Taiwan.’
China’s increasing interest in Timor had alarmed Australia which have been involved in Timor independence and also garnered international support for the same. However, Australia was embroiled in a spy and snooping controversy which soured relations between the two countries. The issue of royalty of offshore oil fields and the skewed sharing of oil revenue has also angered Timorese politicians.
Australia’s Relations with Timor-Leste
Australia’s stance towards Timor-Leste has softened in recent years. The relationship between the two countries has been through various disagreements and negotiations majorly due to the maritime boundary issues. The maritime region surrounding both countries is rich in hydrocarbon resources like gas and oil fields. Therefore, both the countries came forward claiming the share in the maritime areas.
The relationship started getting normal when the two countries signed the ‘Maritime Boundary Agreement’. Despite the “maritime boundary conciliation process”, the engagement between the two countries stays firm. Canberra has helped Dili on various fronts and has been the largest donor in terms of aid in the past years. Many Australian private companies have also invested in various sectors of East Timor.
Australia also announced “a maritime security package, which includes funding for a new naval base and the provision of patrol craft to the Timor-Leste Defence Force (F-FDTL), in addition to funding for the building of a sub-sea cable link between the two countries”.
In the “2017 Foreign Policy White Paper,” the Australian government has mentioned about the increasing competition for the aid and assistance of various infrastructure projects in the region. The varying sources of financial aid and assistance can also make the management of debt level difficult and can also undermine the regional co-ordination. Canberra will use its aid programme to fill in any gaps while competing with the capital investment by other countries, majorly China.
Australia is proactively focusing on securing its maritime interests in the region. As Beijing is looking forward for a chance to increase its footprints in the region including Timor-Leste, Papua New Guinea and other small Pacific Island Nations, Canberra is bound to secure its own maritime interests specifically in the immediate neighbourhood.
Way forward
The Chinese investment in recent years has been increasing steadily but it is still less as compared to other countries like Australia, the European Union, Japan and others. Moreover, Timor-Leste’s geo-spatial position is actually on the southern side of the crucial maritime routes which are covered under the BRI. This can be the reason for limited Chinese investment and aid in Timor-Leste.
Timor-Leste is a poor nation in which people are still struggling for their basic needs. Additionally, it is also highly prone to various natural calamities like earthquakes, tsunamis and cyclones. Being an agrarian economy, deforestation also poses a real threat to the vulnerable environment and economy of the country. Adding to the misery of Timor-Leste is the climate change and sea-level rise which poses an existential threat to around 13 lakh people living in the country. Instead of involving Timor-Leste in the power games of the region, the neighbourhood countries and the other powers should help the nation to achieve the development and basic standard of living for its population in a sustainable way.
Notes:
1. https://nsc.crawford.anu.edu.au/department-news/14169/chinese-influence-timor-leste-cause-concern
2. https://earthjournalism.net/stories/voices-tasi-mane-petroleum-project-brings-concern-optimism-to-timor-lestes-southern-coast
3. https://www.futuredirections.org.au/publication/chinese-and-australian-interests-in-timor-leste-at-odds-or-mutually-beneficial/
4. http://timor-leste.gov.tl/?p=9967&lang=en
5. https://www.futuredirections.org.au/publication/chinese-and-australian-interests-in-timor-leste-at-odds-or-mutually-beneficial/
Pic Courtesy-Tanushree Rao at unsplash.com
(The views expressed are personal.)
Nikita Vats is a Doctoral Research Fellow at the Jindal School of International Affairs (JSIA), O.P. Jindal Global University. Prior to this, she worked as a Research Associate at the National Maritime Foundation, in India. She holds a B.Sc. Honours in Chemistry from the University of Delhi and earned her Master's degree in Chemistry from Panjab University, India. In addition to her scientific background, she possesses a Master’s degree in Political Science and International Relations, showcasing the breadth of her academic pursuits. With a multifaceted academic foundation, she delves into compelling research areas such as strategic affairs in India’s Energy Security, the dynamic landscape of Energy Transition and Geopolitics, Climate Change Diplomacy, and various Technological Issues. Her diverse research interests underscore her commitment to exploring the complexities at the nexus of science, international relations, and environmental issues.
