22 March 2011

EITI 2009 report to be launched 25 March

Timor-Leste's compliance with the international Extractive Industries Transparency Initiative was accepted in July 2010, following the publication in late 2009 of its report on oil and gas payments here during 2008. The 2009 report will be released on Friday 25 March 2011, 3:00-6:00 pm, at the Ex-Mercado Lama Convention Center. This event will include comments from the NGO Forum, an EITI working group civil society representative, an oil company representative, a government representative and the President of Parliament.

We hope that this report, released more than 14 months after the reporting period, will provide important information about oil and gas revenues during 2009, which comprised about 80% of our economy and paid for 95% of state activities. This report will complete other 2009 annual reports which omitted data, including those from the National Petroleum Authority and the Ministry of Finance on the Petroleum Fund.

A pre-release version of Timor-Leste's 2009 report was analyzed by Revenue Watch Institute and compared with those from 22 other EITI-engaged countries. Timor-Leste's report ranks a little worse than average, as summarized in this excerpt from the RWI website.

For more information on EITI in Timor-Leste (mos iha lian Tetum), including the 2008 and 2009 reports and commentary, see La'o Hamutuk's website.

Update 6 April: La'o Hamutuk has posted the official version of the 2009 EITI Report to our website in four languages. 

16 March 2011

Heavy Oil project collapsing under its own weight

La'o Hamutuk recently obtained the January 2011 report from the Italian company  overseeing the $900 million national electricity project, and we have added its information to our web page on this project, which contains background and context, as does our blog entry late last year. This project will use 3/4 of the $599 million allocated to Infrastructure Fund for 2011.

The January report portrays a drastic deterioration in the quality of the work, although the pace has picked up slightly. A contract was signed with the Indonesian company Tehate for the Liquica-Maliana-Suai-Cassa-Betano part of the grid, after negotiations with DCP fell through. Wärtsilä has begun work, and invited EDTL to send people to Finland and Italy in March to observe factory testing of the first three generator sets. The number of Timorese workers on the project has dropped to 331, along with 591 workers from China.

 Here are a few quotes from the report:
  • "[EDTL] was disappointed during the visit made in Dili substation on January 20th to see the site in a state of neglect."
  • "with the present trend we believe that the Contractor is not able to meet the completion dates given to H.E. the Prime Minister."
  • "From Liquica substation up to Lospalos substation ... no substantial progress is visible. The number of towers in this north part of the Power Grid is 554, at the end of January a total of 249 towers were erected, but many of them have missing pieces, are incomplete and require additional time to make an overhaul."
  • "The situation which seemed had improved as far as the quantity of the work is concerned had been badly darkened and affected by the quality of the workmanship. A lot of reparation works are required and therefore towers can not be considered completed."
  • "The Contractor is invited once again to take action on the issue of the Timorese workers to be trained as tower erectors."
  • "The conductors strung in the section of 10 towers in Hera-Manatuto has been heavily damaged and must be dismantled and done it again."
  • The heavily deterioration of the quality of the workmanship in the transmission line, the tower erection and the stringing of the conductors are carried out in a manner which do not have a proper word to be described — ghastly — horrible, the photos produced as evidence of the quality of the work show that workers are not at all qualified rather they are common labourer. The Contractor is warned that all the towers with defects and conductors damaged will not be paid for till all adequate reparation is carried out. The Consultant had shown a lot of tolerance collaborating in order to have the work done fast, but there is a limit to be tolerant .... Those workers responsible of this situation are incompetent and should be sent back to China and replaced.
  • "Attending this meeting [two weeks later] are also the Leaders of all the Tower Erectors Teams (previously requested by the Consultant) to give them a strong warning that if they continue to produce such disgusting quality of the works all of them will be dismissed and sent back to China. The photos produced as evidence left them astonished. We hope that the lesson taught them something. The Contractor is warned for the last time that drastic measures will be adopted."
  • "Pollution and environmental problem. Once more the Contractor is reprimanded for the fact that in the weekly report it is mentioned that is taking good care of the situation, but in the reality it is a mess in every working place.
    Yesterday the sea side and the beach in Dili were scattered with hundreds of pieces of red plastic sheets used to wrap up the steel structures bundles for protection during transportation, so it means that in Hera-Manatuto-Baucau all the waste are dumped in the sea and from there the current transported all these polluting waste up to Dili. Fisherman made a lot of complains for the fishing area polluted and all these plastic trapped in the fishing nets.
    CNI22 does not make a good reputation of itself."
  • Two weeks later, CNI22 objected: "The Contractor considers the statement made by the Consultant exaggerated, but it is not because photos are there as evidence and fishermen can be questioned all the time."
  • "The Contractor in the weekly reports always states that is taking good care of the [environment] situation keeping all the places clean and under control, but in the reality it is not like that, nothing or very little is being done concerning the protection of the environment."
  • CNI22 and EB pointed fingers at each other about approval of drawings for transmission line materials, with EB calling CNI22's claim that EB is holding up purchasing by failing to sign off on drawings "totally groundless."
  • "The Consultant reminded once more that the quality of finishing works [at Dili substation] must be improved. ... In the 20Kv building the concrete floor done is not in accordance to the drawing and must be demolished and removed."
  • "Unprofessional handling of the materials during loading, unloading and transporting from the year to the site that causes minor to heavy damages of the materials."
  • "Coordination to local residents around the work sites is not properly handled."
The January report reiterates concerns in previous reports about worker safety, health, housing, pollution, littering, sanitary facilities, lack of required permits, and failure to report or monitor environmental issues. "To date, [CNI22] has yet to commence the implementation of the [March 2010] Environmental Management and Monitoring Plan."

The Government's oversight of the project is lackadaisical, with only a few EDTL representatives attending project meetings. Although "by instruction of the Prime Minister, no compensation should be paid for the land," several land disputes have been left to the companies to work out. CNI22 blames EDTL for delays in clearing material through the port and customs, although ELC/Bonifica says it is the forwarding agent's fault.

Nevertheless, $90 million of Timor-Leste's money was spent on this project during 2010, $447 million more is allocated for 2011, with more than $370 million to follow. The EDTL project manager pointed out that Timor-Leste's National Parliament, by enacting the 2011 state budget, has "announced officially that the project will be completed within the year 2011, is CNI22 in the position to guarantee this time schedule?"

09 March 2011

IMF report discusses critical economic issues

The IMF has just released its annual report on Timor-Leste's economy and financial management, dubbed the Staff Report for the 2010 Article IV Consultation. This year's edition is more than 70 pages long, and includes a Debt Sustainability Analysis co-authored with the World Bank.

The IMF reached different conclusions than the Government about a number of things in "the most oil-dependent economy in the world," including forecasts of non-oil GDP and advisable levels of public spending. They wrote that "Large uncertainties surround the medium-term outlook, including the path of oil prices and production, the magnitude and quality of public spending, and progress in business-enabling structural reforms." They observed that "spending at a slower-than-planned pace, consistent with the absorptive capacity of the economy, would stand a better chance of realizing high quality projects and crowding in private investment."

The report includes a statement conveying the Government's dissenting views.

As the IMF website can be difficult to access, La'o Hamutuk has copied the documents to our site. You can download the complete report (1.3 MB), which includes the following documents:
The IMF report relates to several important issues which La'o Hamutuk works on, including the 2011 State Budget, borrowing, the Strategic Development Plan and revising the Petroleum Fund Law. We will continue to analyze and publish about its observations and recommendations.

04 March 2011

Corruption and the Resource Curse in Timor-Leste

La'o Hamutuk was recently asked to give a presentation as part of the Strategic Planning for Timor-Leste's new Commission Against Corruption. Our Tetum-language presentation (also translated into English) focuses on lessons to be learned from other countries as well as the characteristics of oil-export-dependent economies that encourage corruption. We pointed out some signs of corruption which can be found in budget, documents and suggested that CAC form a legislative division to ensure that future laws can prevent, rather than allow, corruption.

La'o Hamutuk foin halo aprezentasaun ba planimentu estratejeiku Komisaun Kontra Korrupsaun (CAC) nian. Ami nia aprezentasaun iha lian Tetum (mos iha Ingles) inklui buat balu Timor-Leste bele aprende husi rai seluk, no mos karakteristika ekonomia depende makaas ba exportasaun mina rai, bele hamosu korrupsaun. Ami dehan katak dokumentu husi Orsamentu Estadu bele fo indikasaun ba korrupsaun, no mos sujere katak CAC bele kria divisaun legislativa ida atu garantia katak lei foun sira bele prevene, la'os fasilita, korrupsaun.

Click for information on the draft Anti-Corruption Law currently before Parliament.

02 March 2011

LH Submission on draft Basic Environmental Law

This a shortened version of a page on La'o Hamutuk's website.

In late January, Timor-Leste's Secretary of State for Environment (SEMA) circulated a draft basic Environmental Law for limited public consultation. On 28 February 2011, La'o Hamutuk made a 48-page, English-language submission on this draft law, in three parts:
The following is a summary of our submission, which was assisted by volunteer international experts.

A healthy environment is intrinsically valuable.

The general approach of this law appears to be that of resource users - seeing environmental components as something to be exploited for material gain, and the environment itself is a resource. A more proactive way would be to define a necessary quality of environment (including the intrinsic value of the environment and its components) and minimize damage, protect/conserve and strengthen natural systems to enable sustainable use.

Environmental involvement should be “mainstreamed.”

Protecting and preserving Timor-Leste’s environment is not the job of a single State Secretariat or Ministry, but should involve the active participation of people and institutions throughout the Government, as a corollary to the Principle of Participation. Just as “Gender Mainstreaming” makes everyone responsible to ensure that women have equal rights and opportunities, “Environmental Mainstreaming” would encourage everyone planning projects or making decisions for the state to consider environmental implications of their actions. Every policy, law or regulation should be written with an eye to how it can impact on or protect the environment.

Public consultations

We thank SEMA for holding this consultation relatively early, although two NGOs were the only ones asked for input on this highly complex, critically important law. We urge a thorough, informative, participative, transparent, linguistically-accessible and open-minded way public consultation in all districts and other rural communities.

International perspectives are increasingly seeing the environment as a human rights issue,  including communities' right to exercise (or withhold) free, prior, informed consent to projects which could affect them.

Over the years, La’o Hamutuk has written more than 30 submissions. Many of these suggested ways to make public consultation more effective, including:
  • Advance distribution of materials in Tetum and/or Bahasa Indonesia as well as other languages, in electronic form (as well as on paper), and on the internet.
  • Allow at least one month, and more time for issues that will benefit from outside expertise.
  • Enlist local civil society organizations.
  • Report back to those who participated with a list of all suggestions received, what actions were taken in response, and why.
Timor-Leste’s Environmental Licensing Decree-Law  came into force less than three weeks ago. It was enacted without any public consultation, even though its preamble says “public consultation is a fundamental right enshrined in the Constitution, and also an instrument of decision-making process, which allows integration of diverse views and perceptions of the project....” We hope that Article 11 ("Public Consultation") of this Decree-Law does not reflect SEMA’s view of a proper public consultation, as it is about socialization , rather than consultation. If we had been asked, we would have suggested adding that:
  • Decision-makers should use the consultation process as a source of information and perspectives to enable them to make better decisions.
  • Special efforts must be made to obtain wide participation from local communities which may be impacted, especially vulnerable and remote populations.
  • Stakeholders, civil society organizations, the public and especially local communities must be invited to participate.
  • Consultation must be completed, and its results incorporated, before laws are approved or projects are allowed to proceed.
  • The laws should be clear who is responsible for each step of this process.
Before enacting this Basic Environment Law, it would have better to develop a  national environment policy through extensive public consultation. Without such a policy, the principles underlying this law (to the extent that they exist) do not represent broad-based Timorese wishes and desires.

Environmental Licensing Decree-Law

Had there been a public consultation on the Environmental Licensing Decree-Law, we would have pointed out other basic weaknesses, including these examples which are also relevant to the Basic Environment Law:
  • The sanctions are so small as to be meaningless for a large company – all they can lose is what they gained, so it’s a no-lose gamble to profitably destroy the environment.
  • There is no obligation or sanction on state agencies or officials for violating this law.
  • There is no provision allowing a potentially impacted community or person to ask a court to issue an injunction to delay or stop a project.
  • The Law fails to acknowledge the potential for significant environmental impacts from the cumulative effects of small individual activities.
  • The Evaluation Committee which recommends the requirements and issuance of a license should be independent and include representatives from several sectors.
Complementary legislation

The proposed Basic Law on Environment omits many details which will be in later  regulations enacted in a closed process, including:
  • Sanctions for violations
  • Security deposit
  • Rules for use of renewable resources
  • Regulating marine and coastal activities
  • Mining, sand and gravel, and other nonrenewable resources
  • Pollution
  • Solid waste management
  • Hazardous waste
  • Environment Fund
  • Supervision and enforcement.
These laws should be enacted soon, as the passage of this Base Law for Environment creates a legal hodgepodge. This law could list the UNTAET and Indonesian laws which remain in force, providing more legal certainty. Nevertheless, we do not encourage hasty enactment of Timor-Leste’s environmental legal framework. The weaknesses of the Environmental Licensing Decree-Law demonstrate the dangers of bypassing public consultation and Parliamentary debate.

Climate Change

Although climate change caused by the emission of greenhouse gases affects most of our people, it has been omitted from this draft law. A separate law to implement our treaty obligations may be also appropriate.

Although our emissions are low or exported, this will change when heavy oil power generation starts, the PEDN is implemented, the Tasi Mane petroleum corridor is built, and an LNG plant for Greater Sunrise comes on-line. However, as a signatory to the UNFCCC and Kyoto Protocol, Timor-Leste is committed to mitigation actions.

The people must act if the regulators fail to.

Even with environmental mainstreaming, there will be times when an destructive project has so much money or political backing that it may proceed in spite of violating this Law.

This can be made less likely with a mechanism where the courts can stop a project even if it has been licensed. Citizens who have been or will be affected by an activity should have standing to bring such a case to court, and judges should be empowered to issue temporary or permanent injunctions based on legal and scientific evidence, which can direct officials or project promoters to take certain actions or face criminal sanctions.

In addition to transparency already required by this law, the government should be required to give reasons for its decisions, demonstrating that they are consistent with the goals of the legislation.

Petroleum activities are more dangerous on shore than at sea.

Timor-Leste has been through several EIA processes for off-shore oil exploration. Although La’o Hamutuk participated in those processes, we were surprised to hear them cited as model processes. They are only good in comparison with the lack of assessment or consultation for virtually all other environmentally-sensitive projects, such as the heavy oil power plants.

Timor-Leste so far has experienced only a small taste of the petroleum industry, as all activities have been far out at sea. When onshore activities like the Tasi Mane project and the onshore LNG plant begin, the impact on human life, local communities and people’s livelihoods, as well as on complex land and coastal ecosystems, will be much greater.

Petroleum regulation here has been complicated by overlapping jurisdictions between DNMA, ANP and SERN, and by pressures to maximize short-term state revenues and company profits from petroleum activities.

La’o Hamutuk's 2008 report Sunrise LNG in Timor-Leste: Dreams, Realities and Challenges contains many environmental observations and recommendations, including:

  • An LNG Project could double Timor-Leste’s carbon dioxide emissions to the atmosphere and will generate significant amounts of polluting materials, such as hydrogen sulfide, oils, garbage, sanitary water, and other waste. Timor-Leste currently has insufficient laws or capacity to regulate, monitor and control waste generation and pollution of this scale, and many important steps need to be taken:
  • The Government should revise the Law on Environmental Impact Assessment. An EIA should include a detailed Environment Management Plan.  The EIA process should include informed local consultation and consent.
  • A Pollution Control Law should specify limits to pollutants, including CO2 and other greenhouse gases, chemicals which affect sea, ground water and soil quality, as well as issues like flaring and noise pollution.
  • A base law on the environment, incorporating pollution control and environmental impact assessment laws should also define conditions for decommissioning.
  • Each law developed should include sanctions and/or penalties which are severe enough to compel compliance. Contractual agreements should stipulate that the operating companies obey these laws.

This draft law presumes that sanctions will deter destructive practices and encouraging those which protect the environment. However, has no strategic overview of the  system, and focuses on monitoring environmental damage after the event and finding out who should pay compensation. In the real world, the penalty often is cheaper than the value of the environmental degradation, or in many cases the pollute’ cannot be held to account.

Issues raised in the article-by-article part of our submission:
  • Stronger and more specific wording, with loopholes or qualifications removed and implementation responsibility clarified.
  • More attention to spiritual and cultural benefits from the environment and environmental services, rather than just economic benefits.
  • Define "Ecosystem Services" (services provided by ecosystems including water purification, pollination, erosion control, soil formation and nutrient recycling), "Endangered Species," and "Vulnerable Groups" (women, the elderly, youth, poor, ethnic minorities, religious minorities, the disabled and displaced persons, as well as subsistence farmers and fishers).
  • Strengthen references to international treaties, including advocacy in international fora for reduced carbon emissions and other environmental policies.
  • Prioritize scientific expertise and evaluation in making decisions, to balance political and commercial pressures.
  • Improve the quality, quantity, accuracy, and completeness of information distributed to the public, as well as transparency and reporting back regarding environmental monitoring.
  • Develop how the state will recognize and promote Tara Bandu.
  • Include lian nain and other traditional leaders in informing and representing their communities.
  • Increase fines and penalties to deter violations.
  • Improve coordination with land and planning related processes and legislation.
  • Add Environmental Quality Standards on biodiversity and cultural resources .
  • WHO standards are inadequate in the interim.
  • Include freshwater and riparian ecosystems as renewable resources.
  • Recognize that air and soil may not be renewable in human time-scales.
  • Give more attention to dams, storm water runoff, waste disposal and activities at sea.
  • Ban the importation of genetically modified organisms.
  • Clarify confusion in institutional jurisdictions for extractive industries.
  • Be more careful about exempting small-scale or household extractive use.
  • Clarify environmental rules for sand and gravel extraction, and don't exempt beaches.
  • Include concerns about negative impacts of some alternative energy.
  • Use a broader concept of visual pollution.
  • Remove support for carbon and emissions trading.
  • Establish a governmental environment policy for procurement and construction.
  • Clarify how compensation and benefits will be distributed to communities.
  • Ensure that citizens can act if state agencies fail to perform their duties.