COVER STORY: SEPTEMBER 20, 1999 VOL. 154 NO. 11

Being Free Is Not the Same Thing as Being Prosperous
Although coffee is East Timor's No. 1 export earner, the territory's economic viability may not amount to a hill of beans
By ERIC ELLIS Singapore

Ironically, the neglect of almost 400 years of colonialism--from the benign Portuguese version to the brutal Javanese approach--offers East Timor its best prospect for a viable post-independence economy. That neglect grows wild and plentiful in the jungle hills of this verdant half-island: some of the world's finest strains of arabica coffee plants, untouched by chemicals or human hands and, in an ideal world, destined for the West's trendy coffee shops. Call it the Starbucks Economy. While there's lofty talk of an independent East Timor developing eco-tourism, casinos and oil, it is American yuppies--and their willingness to pay $4 a cup for pure organic blends--that may be the salvation of the place. The U.S. bought $20 million of Timorese coffee last year, and the figure could well grow. Predicts Australian academic Scott Burchill: "It will be ideologically sound for a New Yorker or a San Franciscan to drink a cup of independent East Timorese coffee."

	ALSO IN TIME
	Island of Death Thugs supported by the Indonesian military lay waste to East Timor--killing hundreds, rocking the government in Jakarta and ruining the country's reputation in the eyes of the world Hideout A view from inside the U.N. compound Economy Meet the world's next basket case No Refuge There's no escape from fear in West Timor
	RELATED STORIES
	CNN Plan for East Timor Peacekeeping Mission Hits Snag Indonesian military objects to Australian participation ASIAWEEK East Timor's Agony The former Portuguese colony descends into anarchy as pro-Indonesia militias go on a campaign of violence to thwart independence One Reporter's Notebook How journalists came under the gun too
	MESSAGE BOARD
	Indonesia and East Timor
	QUICK VOTE
	Should Indonesian President B.J. Habibie resign? No, he needs to stay in place and do more to resolve the East Timor crisis Yes, he should quit before he is deposed No, if he resigns, the Indonesian military could seize control View Results

Whoever becomes East Timor's first finance minister will face an enormous task. The territory has little that resembles a functioning economy. Just one month's revenue for the Seattle-based Starbucks coffee chain--which does buy East Timorese coffee beans and has remarked on their improving quality in recent years--is equal to the annual $110 million budget Indonesia provides. Alarmingly, an Indonesian minister last week said that it will stop funding East Timor if it gains formal independence. The World Bank predicts it will take 15 to 20 years for East Timor to reach the level of prosperity attained by Indonesia, a sobering comparison given the recent economic chaos throughout the country. Living standards in Dili are a tenth of Jakarta's.

Indonesia has long claimed it developed a sound infrastructure in East Timor, but the results are not obvious. The World Bank says only 27% of houses have electricity, against the Indonesian average of 78%. Roads are so poor the state rice distributor, Bulog, ships from point to point within Timor by boat rather than truck. Literacy and education levels are woefully low. There is just one public library in the entire territory. Nor is East Timor blessed by geography: it sits between rarely visited eastern Indonesia and sparsely populated North-West Australia, far beyond the main regional shipping lanes. Tourism holds promise, but with virtually no travel infrastructure--and formidable competition from idyllic Bali--prospects are extremely long-term.

Foreign aid, or "guilt money" as some observers describe it, could support an independent East Timor in the short run. Portugal, Brazil, Australia and New Zealand have pledged funds to meet current budgets for five years, the United Nations' target for securing democracy in the territory. But foreign investors seem more circumspect. East Timor's 850,000 people have a per capita GDP of around $200, lower than that of Bangladesh or Cambodia. And the militias that have been terrorizing Dili have vowed to sustain their campaign from the same mountain lairs where independence rebels fought Jakarta for nearly 25 years. Says Burchill: "Foreign investors do not like political instability, and frankly Bali's beaches are better."

The long-anticipated oil boom in the Timor Gap fields off East Timor's southern coast has yet to materialize. While oil seeps from the ground in the southern jungle, exploratory wells sunk by U.S. and Australian firms in the Timor Sea have yielded nothing of the North Sea-like prosperity forecast by Australia and Indonesia when they signed a treaty in 1989. East Timor will receive its share of a re-negotiated pact--it currently gets nothing from the existing treaty--but revenues are expected to be thin.

Some hope springs from Lisbon, where government arm-twisting has created a group of investors that includes Portugal's largest bank, electric utility, telecom and the state-owned airport and port authorities. The group claims to have up to $300 million to invest. But invest in what? The little that passes for economic activity in East Timor--mostly from marble and sandalwood trading--has long been sequestered by the Indonesian military, spoils of war for the officers who manned the 1975 Operation Seroja invasion. Diplomats estimate a few generals together make as much as $20 million a year from their fiefdom. "Its been a good earner," says a Western diplomat. "They won't let that go without a fight."

Australian hotelier Gino Favaro knows how to fight, but his hopes for East Timor have been dashed before. He returned to the territory this year to take back the waterfront Hotel Dili, where Portuguese waiters in starched white aprons once served chateaubriand and Mateus Rosé in this Lisbon-in-the-tropics. The Favaro family fled the hotel in 1975. Since then the building has served as an army barracks, officers' mess, state guest house and, as it deteriorated, a flophouse for the occasional tourist. But Favaro's return was brief. The hotel was set upon by militia in the recent fighting, and this week he fled once again to Darwin. "Everyone speaks of reconciliation," says Favaro, "but how does a foreign investor deal with a guy with a gun who's wearing the watch of a dead foreign journalist?"

He may be referring to East Timorese militia warlord Joao Tavares, one of the territory's wealthiest men, who is said to sport the "trophy" watch of one of the five Australian journalists killed by Indonesian soldiers during the 1975 invasion. Tavares has grown rich on military patronage and says he's not moving anywhere. It will be a long time before the rosé flows again in this blighted land.