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Statement by H.E. Prime Minister Mari Alkatiri On the occasion
of the Extractive Industries Transparency Initiative (EITI) Multi-stakeholder
Conference, London, 17 June 2003
Good Morning/Afternoon:
Baroness Valerie Amos Secretary of State for International Development
Distinguished Guests
Ladies and Gentlemen
Thank you Honourable Secretary of State for the invitation to
attend this Conference, and for the opportunity to make a statement
on behalf of the world's newest nation, the Democratic Republic
of Timor-Leste.
The Timor-Leste Government wishes to state its support of the
Extractive Industries Transparency Initiative, and we welcome
the opportunity to participate in the Initiative. We view this
as a positive step towards achieving our goal of open and transparent
government, and take this opportunity to commend Prime Minister
Tony Blair for fostering this initiative.
After a year of independence we are a nation in the process of
successfully building a democratic and sovereign state. We recognise
that success will only come with good governance and that is why
we have been focusing in the last year on creating an institutional
culture, by setting up structures and institutions which can manage
decision making processes in all arms of government in a responsible
manner.
Strong institutional culture and good governance can only be
achieved through accountability and transparency in all levels
of Government and the public sector. However, to achieve this
it is essential that our people are properly armed with the skills
required. Assistance from the international community in education,
employment and training of Timor-Leste nationals in the petroleum
sector will help Timor-Leste achieve this objective.
The oil and gas industry is of the utmost importance to the ongoing
development and growth of Timor-Leste. Proper management of revenues
from this sector is critical in ensuring a strong economic and
stable political future, not only for the current generations,
but for the future generations too. Generation equality is a central
feature of the policies and structures we aim to put in place.
This Conference comes at an important time for Timor-Leste. With
Bayu-Undan, a world class liquids and gas project in the Timor
Sea, set to go into production in 2004, Timor-Leste will start
to receive considerable amounts of petroleum revenues. The world
will be looking at Timor-Leste and whether we manage our petroleum
revenues transparently.
We therefore intend to set up a Petroleum Fund to meet our aims.
We have sought advice on international best practice that we can
adapt to our needs from the IMF, World Bank and ADB. A Petroleum
Fund is no substitute for sound fiscal management. It can, however,
support sound fiscal management if it has wide political and popular
support, clear rules and stores genuine savings by the Government.
Our Fund will be integrated into the budget process. Fund assets
will be prudently managed and invested offshore. The rules and
operations of the fund will be transparent with stringent mechanisms
to ensure accountability and prevent misuse. At the same time
our Fund will maintain the sovereignty of Parliament over revenue-raising
and spending decisions.
We have learned from the experience of our friends in Norway
and call the model we shall adopt "Norway Plus".
Very simply, the Fund will receive all our petroleum revenues
and build up a balance that earns income. The Fund's objective
is to maintain the real value of petroleum wealth (both financial
assets from petroleum already produced and estimated revenues
from petroleum still in the ground), thus protecting the interests
of future generations. Withdrawals from the Fund will meet the
difference between our spending and our non-petroleum revenues.
The "plus" in Timor-Leste will be firstly, a guideline
that only sustainable income from our petroleum wealth can be
spent and, secondly, a range of accountability mechanisms including
an independent Fund Council to oversee the operations of the Fund.
If government proposes to spend more than the sustainable income
from petroleum wealth it must give a separate justification to
Parliament and also estimate the long-term effect on petroleum
wealth
For transparency, we shall publish what goes into the Fund and
publish what is taken out. Its accounts will be independently
audited. We want the people of Timor-Leste and the rest of the
world to know that this nation can make good use of its oil and
gas wealth as it is extracted from the Timor Sea.
At present we are dealing with only one major project, developed
under the Timor Sea Treaty between ourselves and Australia. We
aim to complete our sovereign independence by settlement of permanent
maritime boundaries between Timor-Leste and its neighbours as
soon as possible. When that is done, we confidently expect additional
major petroleum projects to be feasible. Thus it is vital that
we put in place proper management structures for petroleum revenues
from the outset.
Thank you
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