Poverty Profile

Poverty is one of the main problems in underdeveloped countries.  Every year, a large number of people from these countries are found to die mainly due to poverty, and the country of East Timor is no exception to that.  Many people belonging to this part of the world are found to be victimized because of poverty (IMF, 2005, pp. 31).

An estimated 41.5 percent of the population is living under the national poverty line in 2005 (UNDP, 2006, 2).  This figure is not only extremely high in absolute terms but represents an increase in poverty of more than 2 percentage points in just three years.  This trend no doubt reflects the decline in real nonpetroleum GDP that was occurring in those years and underlines the importance of growth in the nonpetroleum economy to achieve poverty reduction.  Also worrisome is the persistent income inequality.  According to the UN Development Report (2006), “the poorest two-fifths of the population account for less than 18% of total expenditure while the richest two-fifths account for 66%” (UNDP, 2006).

East Timor Poverty is primarily caused due to the non-availability of food material in this part of the world.  Every year, there is a scarcity of food grains in the country.  Another important cause of East Timor poverty is the improper allocation of the available food grains.  The IMF (2005) observed that every year, a large amount of food grains, either produced or imported to this land seem to vanish into the suspense accounts of the black marketers, leading to an utter scarcity of food grain.  Although there are many other causes that lead to East Timor poverty, yet these two above-mentioned causes are described to be the most serious ones as reported by the International Monetary Fund (2005).  Briefly, until and unless these two problems are solved in the most appropriate of manners, the East Timor Poverty problem will continue to thrive and kill hundreds of people every year.

 

Percentage of the Population Below the National Poverty Line (Established 2004)


www.undg.org/archive_docs/5382-Timor-Leste_MDG_Report_2004_-_Timor-Leste_MDG_Report.pdf

 

Recognising the imperative of poverty reduction, the East Timor Transitional

Administration (ETTA) in partnership with four donors (the Asian Development Bank, the World Bank, the United Nations Development Programme and the Japan International

Cooperation Agency) undertook a poverty assessment during 2001 (IMF, 2005).  The assessment comprised a survey of all the villages in the country and a living standards measurement (or household expenditure) survey.  Based on the preliminary results from the household expenditure survey undertaken in September 2001, a national poverty line was formulated at the equivalent of $0.55 per person per day (UNDP, 2006).  UNDP (2006) reports that around two-thirds of the $0.55 was allocated to food, sufficient to provide 2,100 kilocalories per day, and the rest to non-food items including education, health, clothing and housing.  As mentioned above,  the IMF estimated that about 41% of the population fell below the poverty line, however with the incidence higher in the rural areas (46%) than in the urban centres (26%) (IMF, 2005).

Booth (2001) made some very important research and states that the vast majority of the poor (85%) live in the rural areas.  Of these, the poorest groups are in households that have small landholdings or are headed by fishermen.  Additionally, households with many children, or those with a large number of elderly or other dependent relatives are most likely to be poor.  Poverty incidence is higher among households headed by those with no schooling, and it declines with a rise in the educational achievement level of the household head.  Booth (2001) continues in mentioning that poverty in East Timor is also related to inequality in income distribution.  The generally used measure of inequality is the Gini-coefficient, which varies between 0 (absolute equality) and 1 (one person receives all the income).  In 1995, the Gini-coefficient in East Timor was at 0.363, which was higher than in some of the other poor provinces of Indonesia.  This can be explained in part by the low productivity of agriculture, which reduced rural incomes.  Although three quarters (73%) of workers were employed in agriculture, they generated less than one-third (around 30%) of the gross domestic product (GDP).  Agricultural output per worker in East Timor during the mid-1990s was less than half that in most other provinces during the Indonesian administration (Booth, 2001).

The majority of the urban workers were employed either by the government or by other service providers and probably had earnings similar to those elsewhere in urban Indonesia.  The International Monetary Fund (2005) report mentions that in the mid-1990s the per capita income in the capital, Dili, was 73% higher than that for East Timor as a whole while that for the poorest district, Lautem, was 42% lower than the national average.  In other words, the per capita income in Dili was about three times that in Lautem.  The departure of Indonesian officials in 1999 was followed by an influx of foreign experts under the United Nations Transitional Administration in East Timor (UNTAET) and other donor and non-governmental organization (NGO) programs.  As a result, the Gini-coefficient increased marginally to 0.37 in 2001.  This effect may be moderated somewhat after the scaling down of UNTAET operations after independence on May 20, 2002 (IMF, 2005).

The government is presently continuing to take some optimistic decisions regarding this poor economic condition.  The country is also getting attention from tourists round the globe and as the tourism industry is growing stronger, the people as well as the government are looking forward to drive the problem of poverty out (Da Costa, 1998).

 

Causes of Poverty

In Booth’s Poverty, Equity and Living Standards in East Timor: Challenges for the New Nation (2001, 244) she lists the more apparent causes of poverty in East Timor which includes the following:

a) Rapid population growth (estimated to be around 2.5% per annum),

b) Lack of ownership and/or access to adequate productive assets, including land (for example, 24% of the families owned less than 0.5 ha of agricultural land and 60% between 0.5 and 2.0 ha),

c) Lack of productive skills (including literacy),

d) Lack of remunerative employment or jobs (the open unemployment is more than 16% and especially high among the youth, and there may be significant underemployment in the agriculture sector),

e) Lack of or inadequate access to social and economic services (e.g. access to schooling is low especially in the poorer districts, and the rural residents have to walk on average 70 minutes to reach the nearest health facility; and access to extension services are low and markets are difficult),

f) Lack of information about the rights and obligations of citizens (this has been improving in the last two years),

g) Political, social and economic turmoil, resulting particularly from the violence of 1999,

h) Discrimination, particularly against women, in the economic, social, political and legal arenas,

i) Natural shocks including drought, flood and fire,

j) Unexpected death and illness, including Malaria, TB, and STD and HIV/AIDS,

k) Manmade shocks such as revenge killings and violence, displacement and fear/insecurity,

l) Social breakdown, including breakdown of marriage, family and social support

systems, and

m) Increase in the prices of basic necessities (e.g. food, clothing and fuel) and services particularly during 1999-2000, partly resulting from introduction of the US dollar.

Some of these causes may be accentuated by poverty thereby creating a vicious circle.

Consequences of Poverty

The effects of poverty on the poor are degrading and devastating, especially for women and children.  Da Costa (1999) lists the detrimental consequences that poverty has on society.  These include the following:

a) The meagre resources of the poor are not adequate to subsist, let alone to save and invest,

b) The poor are forced to over-exploit renewable and non-renewable resources (e.g. forests including mangroves) for sheer survival, thereby contributing to environmental degradation,

c) The sub-optimal development of the productive potential of the poor, women and other vulnerable groups, results in a reduction or loss of their full contribution to economic growth and social development,

d) The poor may impose negative externalities such as crime, spread of diseases, social unrest, and political instability.

Booth (2001) indicates that poverty reduction should be addressed through policies and programs that help redistribute the growing assets and opportunities, income, services and choices to the poor.  Disaffection of the poor and the disadvantaged may lead to social unrest and political instability, in addition to economic disruption.  Therefore, poverty reduction is not only sound economics but also good politics.  East Timor cannot afford to ignore the potential and aspirations of its poor and women.

 

 

Poverty Conclusion

The implication of the preceding analysis is that improving the productivity of the poor is essential for East Timor’s economic growth.  It should be an integral part of the interventions in all the sectors of the economy to achieve and sustain rapid economic growth and improvements in the welfare of all Timorese.  Pereira (1999) says that creating an enabling environment for catalyzing and sustaining the contribution of the poor to national development is an important task for the Government.  This will involve providing and helping others provide basic social and essential economic services to the poor, nurturing and promoting the entrepreneurial initiatives of the poor, and prohibiting discrimination based on gender, ethnic origin, language, or geographic location (Pereira, 1999).

Pedersen and Arneberg (2004) mention that enforcing the rule of law, creating a secure environment, and a sound management of fiscal and monetary affairs are important ingredients for economic growth and overall development.  To ensure poverty reduction the foundation of East Timor decision-making must be made through rule-based procedures, with reduced opportunities for corruption and favouritism.  The role of Government should be limited to providing those essential services that the private sector and civil society organizations are not in a position to deliver.  These are important ingredients for poverty eradication, gender equity and economic advancement of the country as indicated by Booth (2001).  In particular, there is a need to link governance and poverty reduction closely, to enable the people to seek solutions to their development problems, and to exploit all available opportunities.  East Timor must create a favourable political, social, economic and legal environment for the poor to mobilise their resources, to realise their potential, and to build sustainable livelihoods.

 

From INTERNATIONAL DEVELOPMENT PAPER for Concept of Community Development by Luc Sabot

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