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Timor Leste

Timor-Leste must be wary of China's debt trap

Seeking trade and military advantages, Beijing's investment usually comes at a price

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Timor-Leste must be wary of China's debt trap

Former Timor-Leste president Jose Ramos-Horta shows his tinted finger after voting in the parliamentary election in Dili on July 22, 2017. He says talk of growing Chinese influence in his country is exaggerated. (AFP photo)

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Almost 20 years ago, I received a query from a senior Western adviser to the Cambodian government. Puzzled and disturbed in equal doses, he asked: “Why are there a couple of Chinese peasant families tilling paddy fields in the countryside?”

They did not speak Khmer or any language other than their home dialect. There was an abundance of local farm labor. The money they earned was atrocious and could never justify the trip south into an economic backwater of little strategic significance. Put simply, it made no sense.

A couple of decades later, Cambodia is the poster child of Chinese economic colonialism on a breathtaking scale that far exceeds the likes of the British in India.

And now the same questions once posed in Cambodia are being asked in Timor-Leste despite protests from former president Jose Ramos-Horta. On a recent visit to Hong Kong, the Nobel laureate said talk of the growing Chinese presence in his country was exaggerated.

“It has been extremely inaccurate and misleading when certain writings by academics or journalists talk about growing Chinese influence in Timor-Leste. It’s a cliché and it’s silly. It’s absolute nonsense to talk about growing Chinese influence,” he insisted.

He’s wrong.

The needy are greedy

Timor-Leste’s needs are overwhelming. By GDP it ranks 160th in the world, sandwiched by Lesotho and South Sudan, and in terms of life expectancy it sits below Guyana at 165, with locals expected to live around 67 years.

Its economy has been in recession since 2017 and real unemployment is close to 80 percent, President Fransisco Guterres recently said. Infrastructure is dreadful, while the peace dividend that followed the 24-year war against Indonesian occupation never materialized.

Signs of improvement can be seen in the capital. Dili is safe, roads have been paved, the internet works and there’s plenty of electricity, but locals complain the grid is dilapidated and often breaks, clean water is an issue and the costs of living are expensive.

The real poverty is in the countryside where damage wrought by pro-Indonesian militias after this country voted for independence 20 years ago has not been fixed. Roads are in disrepair,  isolating children from schools, women from hospitals and men from jobs.

It’s also where, according to The Australian newspaper, that “Chinese laborers are living quietly in makeshift accommodation among unkempt gardens and dirty swimming pools.”

Location, location, location

Access to offshore oil and gas remains Timor-Leste’s financial hope. Based on current estimates, the Greater Sunrise development alone holds reserves estimated at US$50 billion. Big bucks, but when spending its money China values strategic issues as much as potential returns on investment.

Strategically, Dili is a back door to Indonesia and an island hop to Australia. Both countries and India are building strategies to contain Beijing’s expansion into the Indian and Pacific oceans and their ties with the People's Republic under Xi Jinping are far from great.

Timor-Leste has access to deep water ports which straddle trade routes — crucial in the great maritime game being played from the South China Sea — and across the Timor Sea in Darwin sits a full complement of 2,500 United States Marines.

It is trying to play a smart game by inviting in investment from all regional players — Australia, Indonesia, Japan, the United States and its former colonial power Portugal — which is exactly what Cambodia was doing a decade ago.

The difference in the current diplomatic climate is that the dangers now posed by Chinese hegemony have been well documented. Beijing debt traps that have sprung up from Fiji to Myanmar and Laos to Sri Lanka have compromised economies and sovereign rights.

And China is investing heavily in Timor-Leste, financing a deep water port, an electricity grid and a four-lane highway, while China Railway Construction Corp has signed a US$943 million contract with state-owned Timor Gap to help run a liquefied natural gas plant.

That’s a big investment for a country of just 1.3 million people, and one which Horta was keen to downplay by noting that China had simply donated “three modest” buildings to the presidential office and the foreign and defense ministries, plus annual grants of perhaps US$7 million.

In June, Timor-Leste’s state-owned gas company rejected reports it would borrow US$16 billion from China’s Exim Bank to fund the Greater Sunrise project.

Pawns in China’s great game

Timor-Leste is following a game plan written by other regional leaders when accepting Chinese money — and too many of them are now tongue-tied and risk losing national assets after borrowing more than they can afford to repay.

Nor does Beijing like critics, particularly from the pliable and impoverished countries needed to secure trade and a military advantage under the enormous ego which has emerged under the paramount leadership of Xi Jinping.

In some places, such as Hong Kong and Cambodia, Beijing’s overarching influence has reached new heights, and it’s a potent recipe amid an ever-widening wealth gap. Chinese investment is designed to maximize Chinese influence as opposed to improving living standards for all.

Flanked by a circus of yes-men and backed by gushing businessmen who trade profits over human rights, pro-Beijing politicians have enriched themselves while passing scraps to the lower ranks of society where the silence surrounding Chinese largesse has been deafening.

Timor-Leste has been exposed to the same dangers as dozens of other countries of a similar ilk. Whether it falls into the same debt trap is its call.

Luke Hunt is a senior opinion writer for ucanews.com. The views and opinions expressed in this article are those of the author and do not necessarily reflect the official editorial position of ucanews.com.

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