Timor-Leste parliamentary committee rejects budget, Dili 20 November 2009

FRETILIN MEDIA RELEASE

Dili, 20 November 2009

Timor-Leste's multi-party parliamentary committee on the economy, finance and anti-corruption, has rejected the Gusmao government's 2010 budget sent to parliament for approval.

In an unprecedented repudiation of the government 66-page report the committee including the government's own MPs, endorsed a 66-page report challenging the legality of the budget law and its lack of a pro-poor and pro-development emphasis. All members of the committee voted in favour of the report, except for the three FRETILIN committee members and the National Unity Party MP and leader, Fernanda Borges, who abstained because the report did not go far enough in condemning the illegality of the so called “referendum package”. 

FRETILIN party Vice President and MP Arsenio Bano said today: "The committee's report presents an incisive and comprehensive legal, financial and economic analysis of this shambles of a budget, which has no poverty eradication or human development-oriented investment. Both de facto Prime Minister Gusmao and his Finance Minister Emilia Pires were unable to respond to the report's criticisms in parliament." 

The report said the proposed budget invested only 2% in agriculture, which "does not only defeat the government's commitment to eradicate poverty, but denies opportunities for improved incomes of the poor and places Timor-Leste further from achieving food security and income security for the poor.  With the high population growth rate (3.2% per annum on average), the aim of achieving food security in the country is moving in a reverse direction." 

The committee also expressed concern with the widening gap between rich and poor. It adopted the opinion from the United Nations Development Program, which tracks poverty in Timor-Leste, reporting to the parliament, "the benefits of growth and income distribution have continued to be in the hands of the richest 20% of the population.  The continued decline in the agriculture growth has compounded the problem of income inequality." 

Mr Bano said that in his budget speech to parliament, Mr. Gusmao failed to even mention the so-called 'Referendum Package' of ill conceived infrastructure projects which have been widely criticized because of the cronyism involved including payments made to the Civil Construction and Public works Business Association, headed by Mr. Julio Alfaro, who was Godfather to Mr. Gusmao for his second marriage.  

"Mr. Alfaro and his family have already benefitted greatly from previous government rice supply contracts, which like the 'Referendum Package' did not go to tender.  We do not doubt Mr. Alfaro’s sincerity in wanting to advance the private sector in our country.  He has not behaved improperly, but it is Mr. Gusmao’s responsibility to avoid any conflict of interest and or irregularities whilst managing the nation’s finances," Mr Bano said. 

The committee's report said "the government presented as justification for the approval of this package (referring to the referendum package) the need to proceed to decentralize the procurement and payment process. In this context this expression appears to be strange given that according to the best doctrines, decentralization only occurs when powers are passed from a state entity to another subordinate entity, or another public entity.  This case involves a different situation because the funds were transferred from the Ministry of Finance to a private entity - the Civil Construction and Public Works Business Association, which is in no way connected to a public entity."

Mr Bano said the 2010 budget placed Health in seventh position in terms of budget allocation, whilst security and defence was fifth. "The de facto Prime Minister has a slush fund of US$48 million, above defence, which together with his budget as de facto defence and security minister places a total budget of over US$92 million under his control," Bano said.

"If 2009 is any indication, then these will again be expenditures that involve no public tenders, but will simply be largesse handed out to extend his political patronage as he has done this year with a similar proportion of the budget.

Bano said the report questioned the legality of the procurement procedures set out in the government decree law 29/2009 proclaimed on 28 October this year.  "This permitted a "special procurement" process involving direct single sourcing / no public tenders for infrastructure projects totaling tens of millions of dollars and an expedited form of payment through a private business association headed by the Prime Minister's Godfather, before any of the works are even started.

"The parliamentary committee analysing the budget has made it clear that because of the failure of the government to comply with basic legal requirements on the structuring of budget allocations and line items, the proposed budget law does not deserve to be approved by parliament.  The committee made 20 recommendations in all, which go to the substance and the legal foundations of this budget law, yet from the discussion to date, it is clear that Mr. Gusmao is simply intent on bullying his MPs to ignore the all-party committee report and ram the budget law through as it is.  They can do that and again it will be a matter for the courts to decide."