Timor-Leste

Fifth Progress Report on East Timor

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Executive Summary

Development Progress

The Trust Fund for East Timor (TFET) was established to address the emergency humanitarian needs of the early postconflict period. That part managed by ADB focused on rehabilitation of infrastructure with initial efforts directed at the urgent needs of roads, ports, and water and power supply. In all activities, Timor-Leste's capacity was severely damaged in the conflict and project implementation necessitated comprehensive support for capacity building.

Much has been achieved by the projects but much work remains to be done. The focus of assistance has shifted from emergency response to more normal development activities. This is reflected in the Hera Fisheries Port Facilities Rehabilitation and Microfinance Development projects which, though consistent with infrastructure rehabilitation, are focused more on long-term poverty reduction and economic and social development rather than on emergency humanitarian and security needs.

Supported Interventions

TFET funds have supported six projects managed by ADB in Timor-Leste with grants totaling $52.8 million. Most projects are at an advanced stage of implementation and disbursements as of 31 October 2002 are 69% of the total value of the grants.

Grant Amount
Contracts Awarded
Disbursed
Available for
Commitment
$52.800 m
100.0%
$38.686 m
73.3%
$35.844 m
69.1%
$14.085 m
26.7%

Emergency Infrastructure Rehabilitation Project -- for $29.8 million to provide access to humanitarian relief and facilitate peace and security by (i) repairing main roads to facilitate transport of aid and security cargo; (ii) inducing revival of economic activity; (iii) reducing port congestion to enable effective logistic services for humanitarian and economic goods; (iv) contributing to power supply restoration; and (v) employing local labor and skills to initiate income generation. Most works are complete, and remaining power supply restoration activities will be completed by end March 2003.

Emergency Infrastructure Rehabilitation Project 2 -- for $9 million to support long-term road sector development by strengthening the local contracting industry, instituting operational and maintenance systems, and providing capacity building for sector management. The project is starting with completion scheduled in 2004.

Water Supply and Sanitation Rehabilitation Project -- for $4.5 million to provide the people of Timor-Leste with adequate, affordable and sustainable water supply and sanitation (WS&S) services using appropriate technology and management systems. Work was successfully completed in June 2001; the grant was closed in December 2001.

Water Supply and Sanitation Rehabilitation Project 2 -- for $4.5 million to ensure the communities of Timor-Leste have access to clean WS&S services as these are considered essential for public health, protection of the environment, and for promotion of economic growth based on appropriate technology and management systems. Implementation is ongoing with physical completion expected in April 2003.

Hera Fisheries Port Facilities Rehabilitation -- for $1 million to contribute to sustained food security for the East Timorese. A parallel goal is to achieve responsible fisheries management by promoting offshore pelagic fisheries and thus ease the inshore fishing pressure. This will be achieved by rehabilitating the necessary harbor infrastructure facilities at Hera port for larger offshore fishing vessels. Construction is ongoing and physical completion will be in March 2003.

Microfinance Development Project -- for $4 million to reduce rural poverty by developing a sustainable rural microfinance system responsive to the needs of the rural poor, particularly women. Performance of rural lending operations will be improved with a focus on establishing an appropriate policy and regulatory framework and capacity building. Three microfinance branch offices are operating. The Project will be completed in December 2003.

Development Impacts

The Emergency Infrastructure Rehabilitation Project (EIRP) addressed the humanitarian and security issues of Timor-Leste by restoring access to roads and increasing the port capacity for humanitarian and military transport.

Social dimensions of project impacts extend and deepen the initial humanitarian benefits. Road rehabilitation under the EIRP provided access to places that would otherwise be isolated. The EIRP2 will maintain access and improve transportation through reduced road closures and lower costs of maintenance and vehicle operation. Rural electricity will provide basic services to many and multiply the potential for more social benefits from increases in availability and duration of supply.

Up to 240,000 people in rural areas and 15,000 in Dili benefited from TFET-funded water supply projects by improving access to safe water supply, thus freeing women and children from many hours spent collecting water. Beneficiaries include 31,500 in the Oecussi enclave and 1,750 on Atauro Island.

Promotion of offshore fisheries at Hera port will increase fish protein supply and bring down prices, which will lead to improved nutrition and health. It will also ease

pressure on inshore fishery resources. Easy access to microfinance is enabling the formerly resource-poor population to start their own small businesses. Market vendor loans are evenly split between men and women but microfinance group loans have a strong gender bias, with some 90% of loans to women.

Employment generation is a pressing need. Road maintenance by community groups and national contractors created employment throughout the country, especially in rural areas, estimated at over 300,000 person/days. Water supply projects are estimated to have created up to 90,000 person/days of work. Increased fisheries production will directly employ fishers and indirectly create jobs in marketing, processing, distribution, and supporting services. Microfinance loans will support employment on farms, in households, and small trading businesses.

After the destruction of assets and systems and the withdrawal of Indonesian staff, the reestablishment of institutions and their capacity to operate and manage projects was an urgent need. TFET-funded projects also addressed institutional and capacity development.

Government capacity was developed under each project:

  • road projects created core staff experienced in maintenance, and reestablished engineering depots, road asset management system, and a system of contractor classification for quick, effective contracting;
  • water supply capacity building activities and implementation experience equipped increasing numbers of WS&S staff with management, technical and planning skills; and
  • microfinance developed the policy and regulatory framework and internal systems and procedures for microfinance institutions.
National contractors were encouraged to tender for road works and were helped in the classification and prequalification system. This experience increase the ability of local contractors to bid, win, and implement contracts. International and national contractors employed Timor-Leste nationals, increasing the pull of local technical expertise.

NGOs were engaged in water supply projects, developing their capacity to implement participatory community development, including mobilization of beneficiary groups, training, and physical implementation.

Community Groups have acted as implementers as well as beneficiaries of TFET projects:

  • in roads, community contractors provided maintenance in a cost-effective manner for work that could not be undertaken otherwise;
  • in water supply, water users groups helped communities become more self-reliant in addressing shared needs and in implementing agreed solutions;
  • in microfinance, beneficiary groups underwent a socialization process to inculcate in them sound principles of credit and their responsibilities as borrowers.
Continuing Needs

TFET-funded projects have made a great contribution to restore essential infrastructure and services in Timor-Leste. However, much remains to be done to continue the rehabilitation of the country and to go on to development of the national potential. Financial sustainability is an issue that cuts across all sectors, and will continue to require policy action and supportive technical assistance over the medium-term. In sectors addressed by ADB-managed projects, specific capacity development needs can be identified.

Power

Assistance is needed to establish efficient management systems and sector planning capacity.

Capacity development for management and operation of district and subdistrict systems is needed and a review of local power management capabilities may also require further technical assistance support for institutional and capacity development.

Water Supply

Water resources databases were lost in postreferendum violence. Technical assistance may help data collection to reestablish databases and improve analyses.

With TFET project support, WSS has created a core of experienced staff, but National Development Plan aspirations for better health, environmental protection, and quality of life require more staff to extend geographical scope and new skills for such tasks as billing of user charges and improved financial management.

Roads

There is a continuing need for capacity building and EIRP2 will identify human resource development needs for which additional funds are expected to be necessary.

Fisheries

Donor support may assist development of the legal framework and regulations for sustainable natural resource management.

Further assistance to carefully monitor catches may be needed as a tool to implement the precautionary approach to fisheries utilization.

Microfinance

The regulatory and legal framework, especially for credit union operations, needs to be finalized and practical operations reviewed to assess performance and the need for refinement of regulations and laws.

Nationwide expansion of MFIET will necessitate further external assistance.

Effective credit unions are not yet in place and continuing support, perhaps through development of capacity in the Credit Union Federation, is needed.

ADB Technical Assistance

In parallel with implementation of TFET-funded projects, ADB has approved a total of 20 TAs for $8.7 million, of which 11 are substantially complete and 9 are ongoing.

Many of the TAs have supported implementation of TFET-funded projects either as project preparation or addressing specific capacity building and institutional issues. Related work has included development of regulatory and legislative framework, analysis of policy issues, and sector-specific capacity development. Wider support has also been provided to sectors not addressed by TFET, such as posts and telecommunications, Timor Sea Office, and for general capacity and institutional development requirements.

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