Examining the influence of aid on development in Timor-Leste

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Examining the influence of aid on Development in Timor-Leste

MSc Thesis Political Science: International Relations

Research Project: The African Renaissance and the Politics of Development

Department of Political Science

June 2019

Author: George Ereu Student No: 11790704

Supervisor: Dr. Michael Onyebuchi Eze Second Reader: Francesco Nicoli

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Abstract

This research study aimed to assess how foreign aid has influenced development in Timor-Leste with a view to bridge three competing strands on aid effectiveness. Research findings overwhelmingly show that foreign aid contributes to development even when provided at levels of only 2% of GDP per capita. These findings therefore reinforce the Public Interest Perspective that aid has a positive impact on development and growth. In other words, the Public Choice Perspective which states that aid has a negative impact on development and the zero-effect narrative which states that aid has no impact on development are indicative of two assumptions: Either policy regimes in environments in which aid is delivered impede realization of meaningful impact results or simply aid effectiveness is dependent on the context in which it is delivered. These assumptions are however not conclusive given the relatively few underlying tensions as per research findings.

Second, findings reveal that the aid agenda in its current form has moved past the Neoliberal ideology. Neoliberalism per se has only left a long-lasting negative legacy. Aid therefore to Timor-Leste is largely motivated by an Altruistic ideology and less about an Egoistic ideology. Third, research findings show that the Idealist, Realist and Neo-realist perspectives on the motives of aid greatly resonate with the Timor-Leste context and therefore hold strong explanatory power.

Key words

:

Aid, Development, Dependency theory, Neo-classical counter Revolution theory, Neoliberalism, Neorealism, Realism, Idealism, Public Interest Perspective, Public Choice Perspective, Zero effect.

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Table contents

Abstract ... i

Table contents ... ii

Acknowledgement ... v

The Map of Timor-Leste ... vi

List of Acronyms ... vii

TABLE OF FIGURES ... x

LIST OF TABLES ... x

CHAPTER 1: INTRODUCTION ... 1

1.1 Background ... 1

1.2 Timor-Leste Development Context ... 3

1.3 Rationale and Theoretical Framework ... 4

1.4 Chapter summary ... 7

CHAPTER 2: RESEARCH QUESTION, JUSTIFICATION, AND METHODOLOGY ... 8

2.1 Research Question and objectives ... 8

2.2 Research Objectives ... 8

2.3 Justification for the proposed study and choice of research question and objectives ... 9

2.4 Scope of Research and Methodology ... 10

2.5 Methodology ... 10

2.5.1 Qualitative research method ... 10

2.5.2 Quantitative research method ... 11

2.6 Data Collection Methods ... 11

2.6.1 Key Informant Interviews (KIIs) ... 12

2.6.2 Stratified Sampling ... 12

2.7 Data management, compilation, Analysis and transcription ... 12

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CHAPTER 3: A LITERATURE REVIEW ... 14

3.1 Introduction ... 14

3.2 A literature review on aid effectiveness ... 14

3.3 IR theoretical explanations of foreign aid. ... 20

CHAPTER 4: OVERVIEW OF AID FLOWS TO TIMOR-LESTE ... 23

4.2 Context ... 23

CHAPTER 5: AID AND THE ECONOMY ... 27

5.2 Aid, the Transport sector and Development in Timor-Leste: A critical analysis ... 27

5.3 Aid, the Agricultural sector and Development in Timor-Leste: A critical analysis ... 31

CHAPTER 6: AID AND THE TIMOR-LESTE SOCIAL SECTOR ... 36

6.2 Aid, the Health sector and Development in Timor-Leste: A critical analysis ... 36

6.3 Aid, the Education sector and Development in Timor-Leste: A critical analysis... 40

CHAPTER 7: AID, GOVERNANCE, CSOs AND THE PUBLIC SECTOR ... 44

7.2 Aid, Government and CSOs and Development in Timor-Leste: A critical analysis ... 44

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CHAPTER 8: KEY RESEARCH FINDINGS ... 50

8.2 Research Findings and Analysis ... 50

8.3 Recommendations and the way forward for aid as a Development Tool ... 54

8.3.1 Preamble ... 54

8.4 Revisiting emergent hypothetical questions (Ref: Chapter 3 &4 respectively) ... 56

8.5 Contributions Made to Knowledge ... 58

8.6 Challenges and Limitations... 58

8.7 Scope for Future Research ... 59

8.8 Conclusion, Discussions and Reflections ... 59

Bibliography ... 62

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Acknowledgement

Research is not an easy task, it requires resources and calls for deep thinking which at times evokes a feeling of solitariness, all which were challenging for the Author. While acknowledging this fact, I would particularly like to thank the following people:

First and foremost, I bestow my utmost respect to Yahweh for giving me the internal strength to rise to the occasion. My faith in you will leave on forever

Second, the completion of this thesis would not have been possible without the immense contribution of all the Timor-Leste based interviewees: To Kristina Fernandez, Anyanwu Macmillan, Kudakwashe Dube, Mirko Gomez, Simon Mugabi, Kwesi Thompson, Shoib Danish and James Herera. I owe all of them a big debt of gratitude.

I would be remiss not to acknowledge the support of my family especially my brother Emmanuel Oule for the emotional support at the onset of my studies and to my father Atepu Levi whose initial support has made this journey possible: I dedicate this thesis to you both.

Lastly, I extend my heart-felt and sincere gratitude to my supervisor and professor, Michael Eze for his support, inspiration, cooperation and accommodativeness. Without such good virtues, this thesis in its current form would not have been possible. I remain indebted to him.

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The Map of Timor-Leste

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List of Acronyms

AAA Accra Agenda for Action

ADB Asia Development Bank

AusAID Australian Agency for International Development

CA Conservation Agriculture

CPC Community Policing Councils

CoA Chamber of Accounts

CSO Civil Society Organizations

CEDAW Convention on Elimination of all forms of Discrimination Against Women

DAC Development Assistance Committee

DFAT Department of Foreign Affairs and Trade

DHS Demographic Health Survey

DRR Disaster Risk Reduction

EIIP Employment Intensive Investment, Program

EU European Union

FAO Food and Agricultural Organization

FDTL Timor-Leste Defense Force

GBV Gender Based Violence

GfD Governance for Development

GIZ German International Cooperation

GRPB Gender Responsive Planning and Budgeting

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GNI Gross National Income

GovTL Government of Timor-Leste

HDI Human Development Indicators

HDI Human Development Index

HDR Human Development Report

IR International Relations

ILO International Labour Organization

IMF International Monetary Fund

JICA Japan International Cooperation Agency

JSMP Judicial System Monitoring Program

KOICA Korea International Cooperation Agency

LRC Law Reform Commission

MAF Ministry of Agriculture and Fisheries

MCA Ministry of Economic Affairs

MOA Ministry of Agriculture

MODS Ministry of Defense and Security

MOE Ministry of Education

MOF Ministry of Finance

MOI Ministry of Interior

MOSA Ministry of State Administration

MSS Ministry of Social Solidarity

MSTL Marie Stopes Timor-Leste

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NAP GBV Nation Action Plan on Gender Based Violence

NSDP National Strategic Development Plan

OECD Organization of Economic Cooperation and Development

PCP Public Choice Perspective

PFM Public Finance Management Reform

PIP Public Interest Perspective

PNTL Timor-Leste National Police

PS Public Sector

R4D Roads for Development

SEM State Secretariat for Gender Equality

SPS Social Protection Specialist

SWAp Sector-Wide Approach

TLPDP Timor-Leste Police Development Program PNTL Timor-Leste National Police

USAID United States Agency for International Development

UN United Nations

UNSCR United Nations Security Council Resolution

UN Women United Nations Women

WB World Bank

WPS Women Peace and Security

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TABLE OF FIGURES

Figure 1: Growth, Aid and Policy ... 16

Figure 2: A conceptual framework on aid effectiveness ... 19

Figure 3: Taxonomy of motives for foreign aid ... 22

Figure 4: Graph showing Aid Allocations per Government Sector ... 24

Figure 5: Funding Type ... 25

Figure 6: Construction of Liquica-Maubara road section; before and after respectively ... 29

Figure 7: Timor-Leste’s Agricultural exports for the first quarter of 2018 ... 34

Figure 8: A line graphs showing a sequential increase of Timor-Leste’s HDI Value Indicators (2000-2017) ... 42

LIST OF TABLES Table 1: A Review of Timor-Leste’s progress on Health based on HDI value (1990-2017). ... 40

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CHAPTER 1: INTRODUCTION

This chapter presents an introduction to the study and more broadly states its objective. The main aim of this chapter is to set the background through which the study is explored. It discusses comprehensively, Timor-Leste’s development context for a deepened understanding and zooms-in on the study rationale and theoretical framework, which provide a lens through which this study is examined.

1.1 Background

Drawing on earlier approaches to development, foreign aid has remained the most predominant development approach. Whilst other theoretical approaches to development such as the modernist1 theory remain questionable or context dependent, aid is no less controversial and remains a contested terrain (Wamboye, et.al 2013). And yet since its inception in 1947, aid as an institution has continued to dominate the development enterprise. Timor-Leste, which is a small island nation in South-East Asia has been a recipient of foreign aid since it gained independence from Indonesia in 2002. It has received both multilateral and bilateral funding from donor organizations such as the World Bank, Asia Development Bank (ADB), the European Union (EU), United States Agency for International Development (USAID), and the New Zealand Government2_{.Other donors that have widely supported}

Timor-Leste’s development process include the Australian Government, Japan International Cooperation Agency(JICA), the Korea International Cooperation Agency 3(KOICA), the German International Cooperation (GIZ) , the Government of Portugal , the Food for Agricultural Organization( FAO) , the International Labour Organization(ILO) and the Government of Norway among others.

As a post-conflict country, Timor-Leste has received aid both in the form of general budget support, technical assistance and aid for social infrastructure and services4_{and despite such significant aid}

flows, more recent studies on aid effectiveness have continued to present mixed results (McGillivray 2001, Ekanayake et.al 2015). Thus, this study seeks to assess how foreign aid has influenced

1_{The modernist model is anchored in the European Enlightenment ideology. It advocates that the best way to develop is to change or graduate from}

traditionalism to modernism Regmi (2005).

2_{Ministry of Finance, Timor-Leste (Information available through the Ministries Website)} 3_(Ibid)

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development in Timor-Leste, with a view to bridge and find empirical consensus in either of the three different strands on aid effectiveness presented by three different competing camps identified in the literature. The first strand is the Public Interest Perspective (PIP) which contends that ‘aid promotes development and growth’ (Bräutigam et al., 2004 p. 260). This view is shared by Chenery & Strout (1996); Burnside & Dollar (2000); Hansen & Tarp (2000); Morrissey (2001); Dalgaard et al., (2004); Gomanee et al., (2005). The second strand is the Public Choice Perspective (PCP) which contends that aid has ‘a negative impact on development, aid finances consumption rather than investment and substitutes rather than complements domestic resources’(Easterly, 2003; Bräutigam ,2004; Knack 2004; Claudia, 2009; Mengistu, 2015).The third strand straight forwardly states that aid has zero effect or no impact on development and growth (Boone, 1996; Goldsmith, 2001 p.127; Leeson, 2008; Elayah, 2016).Accordingly, research findings overwhelmingly support the PIP and hence reinforces views presented by authors in the first camp however, findings also show that controversy still exists although largely in theory. The PCP and the assumption that aid has zero effect or no impact on development are relevant in theory and less in practice. Second, research findings also show that the aid agenda in its current form has moved past the Neoliberal ideology of the Washington Consensus however the Idealist, Realist and Neo-realist views on the motives of aid still hold strong theoretical explanatory power.

In this view, the rest of this thesis is divided in eight chapters as follows: Chapter one proceeds with a description of Timor-Leste’s development context which puts this study into perspective. It further discusses the rational and theoretical framework which provides a lens through this study is analyzed. Chapter two comprehensively elaborates a research methodology that was utilized to undertake this research. In addition, this chapter explicitly states the justification for undertaking this research and discusses data collection methods and techniques used for this study. Chapter three reviews two distinct literatures; first an argumentative literature on aid effectiveness and second, International Relations theoretical perspectives on aid. The former presents three-pronged competing strands on aid effectiveness which underpin this study and the latter corroborates the Realist, Neorealist and Idealist perspectives with development theories discussed in the theoretical framework. Chapter four on the other hand streamlines the study and discusses specific aid disbursements to the Timor-Leste government sectors and likewise informs the study holistically. In line with research objective three, chapter five examines the impact of aid on development from an economic lens. It critically discusses

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development impact results of aid channeled to the Timor-Leste Agricultural and Transport sectors. Similarly, Chapter six analyses the impact of aid channeled to the social sector and specifically to the Timor-Leste Health and Education sectors.

Accordingly, chapter seven zooms into the political sphere and discusses the impact of aid channeled directly to government and Civil Society. Chapter eight, discusses key research findings and seeks to summarize discussions laid-out in the preceding chapters. It lays-out recommendations and the way forward for aid as a development tool and revisits emergent hypothetical questions identified in chapters three and four. Furthermore, it discusses challenges, limitations encountered during the process of conducting this research and describes contributions made to Knowledge that reinforce the aid discourse empirically. Lastly, this chapter scopes out areas for future research and concludes with a summary which reflects on each of the specific research objectives in chapter 2, based on the analysis, research findings, literature review and theoretical perspectives discussed in the theoretical framework.

1.2 Timor-Leste Development Context

Timor-Leste gained independence on the 20th May 2002 following two foreign occupations that held back development progress. First the over 500 years of Portuguese colonial rule and later the 24 year Indonesian occupation that begun in 1975 and brutally ended in 1999 (Webster, 2017).Independence from Indonesia however did not fully bring about the dividends of peace, thus the Government set forth a vision towards nation-building with an overarching goal to become an upper middle-income country by 2030. Nation building encompassed development in the economic, social and political spheres, as envisioned in its twenty-year National Strategic Development Plan (NSDP 2011-2030) (UNDP,2017). Timor-Leste nonetheless remains a lower middle-income country with a population of 1.2 million and a landmass size of 15,410 km2_{(ibid). The violent uprising in 1999 following an}

independence referendum from Indonesia resulted in destruction of its livelihoods such as farmlands, water supply systems, schools, road networks, hospitals and critical state infrastructure such as energy sources thus setting back development gains (ibid).

Despite making substantial progress, the underdeveloped infrastructure, high unemployment rates, high maternal and infant mortality rates, illiteracy and poverty have impeded development efforts as the country strives to pursue its development goals (USAID, 2016). In terms of poverty levels, for

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instance, latest poverty estimates indicate that in 2014, poverty levels were at 41.8 percent, which remains relatively high despite having fallen from 50.4% in 20075_{. And In terms of livelihoods, the}

country relies largely on agriculture and fishing as the main economic activities. Statistically, 80% of people own agricultural land and 88% are engaged in livestock farming (USAID, 2016). Timor-Leste’s largest source of state revenue is petroleum. Non-oil exports are largely agricultural yields and coffee makes up over 95 percent of this export category. Annual exports from coffee in 2016, amounted to almost US$30 million (World Bank, 2017). In terms of Human Development Indicators (HDI), the Timor-Leste ranks 132nd out of 189 countries on the 2017 HDI ranking, with Human Development Index (HDI) value of 0.625, which only shows an increase of 23.3 percent up from 0.507 in the year 2000(UNDP, 2018). Thus, to consolidate and build on progress already achieved, the country has greatly relied on aid to support its development vision as laid-out in the National Strategic Development Plan (NSDP). The NSDP sets-out a comprehensive framework which underpins Timor-Leste’s development cooperation efforts as later elaborated in chapter 4.

1.3 Rationale and Theoretical Framework

Dependency theory, the Neo-classical counter Revolution theory and Neoliberalism:

Timor-Leste receives approximately 273 million dollars in aid to supplement its overall budget which constitutes about 2% of the overall budget per annum, making it the 7th highest in terms of GDP per capita (OECD, 2016). Timor-Leste’s reliance on foreign aid largely stems from its past turbulent history; first as an exploited Portuguese colony and second, as an occupied Indonesian territory from 1975-1999 (Webster, 2017). The 1999 liberation movement destroyed its functioning economy and core state institutional infrastructure and thus independence in 2002 resulted in a heightened need to embark on the process of nation building— which was largely focused on growing the economy and developing institutional and human capacity. However, the nation building process was largely dependent on aid flows6 and external technical support. This development trajectory therefore reflects by extension the dependency theory tradition which allows the entrance of external capital flows based on priorities already established in national development plans and policies (Love, 1980).

5 Timor-Leste NSDP

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The dependency theory contends that countries in the global south are poor due to obstacles created by the developed world which therefore keeps ‘’peripheral’’ countries dependent on the ‘’centre’’ for market and capital (Regmi, 2018). The Dependency theory though having emerged in the 1960’s was popularized by scholars who criticized development intervention initiated by the developed world in the wake of 1970 debt crises and the subsequent Neoliberal, Structural Adjustment Programs (SAPS7) in the 1980s (ibid, p. 5). Although the SAPs were designed to accelerate the development process by stimulating growth and triggering a market-oriented economy, these programs boomeranged and created a more periphery-centre dependence and greater exploitation (Dang & Pheng, 2015; Jaffee, 1998 p. 152). The Dependency theory was nonetheless criticized by the neoclassical counter-revolution theory which contends that underdevelopment in the global south is not a result of exploitative tendencies of developed countries or international agencies but rather an internal problem that emanates from government control and direct intervention in the market economy through practices such as government-induced price distortions, poor allocation of resources and corruption(Meier, 2001). Taken from this context, this assertion broadens the scope of the development discourse beyond the Neoliberal free-market economic policies of the Washington Consensus. Therefore, one intriguing hypothetical question that potentially evolves out of this debate and is discussed in chapter 8 is: Are current forms of aid Neoliberal in fashion? If so, is Neoliberalism to blame for the persistence of underdevelopment or has it merely left along-lasting negative legacy. If no, could there be more to this phenomenon?

Arguably, while the neoclassical counter-revolution theory holds strong explanatory power, empirical arguments about aid, underdevelopment and development strongly redirect attention to the locus of the debate, which is Neoliberalism. Harvey (2005) contends that ‘Neoliberalism is the deepening penetration of capitalism into political and social institutions as well as cultural consciousness’ and therefore since aid is rooted in Neoliberal thinking , its continued flow to developing countries such as Timor-Leste either reflects the relentless power of capitalist tendencies in maintaining the status quo or a general failure of alternative development theories, such as the modernist theory8_{to translate}

theoretical perspectives into concrete development outcomes.

7 The SAPs were a set of Neoliberal policies that developing countries implemented as a precondition for receipt of aid and this included deregulation privatization, trade liberalization among others

8_{Regmi (2005), asserts that development is possible through change of primitive societies to modern ones. The Modernist theory is however anchored}

in the European ideology which involves changes in pattern of human life, rapid industrialization and urbanization, expansion in media, increased literacy percentage, and greater political participation. Its underlying assumptions dictate that there are 5 stages of development as follows:1) the

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Rodney (1973) reflects on development and underdevelopment. He contends that at an individual level, development means strengthened capacity and skills as well as ingenuity and a general wellbeing and at a level of social groups, development means the increased potential and capacity to manage relationships in all spheres.’ Economic development on the other hand means a strengthened ability and capacity by individuals to manage their surrounding (ibid). Peet et al. (2009) shares a similar but more comprehensive view that; ‘development is an improvement of a complex of linked natural, economic, social cultural and Political conditions.’ In other words, all aspects such as government, politics, organizations, science, human ethics and technology are embedded together. On the flipside, underdevelopment does not denote to a lack of development since it only becomes meaningful when levels of development are compared (Rodney, 1973). Concretely, although the latter definition holds strong weight, Neoliberalism per se has eclipsed such theoretical perspectives since attempts by Neoliberal institutions to stimulate growth in developing countries only resulted to perpetual aid dependence (Easterly, 2003).Aid dependence according to Bräutigam et.al (2004) is ‘a situation in which a government is unable to perform many of the core functions of government, such as the maintenance of existing infrastructure or the delivery of basic public services, without foreign aid and expertise, provided in the form of technical assistance or projects’. Viewed from the Timor-Leste development context, it therefore warrants to note that Timor-Timor-Leste’s economic, social and political development efforts have largely relied on foreign aid as evidenced by donor and country program reports. Aid transfers have largely been in the form of technical cooperation, which is increasingly focused on public policy, administration and financial management (OECD, 2016). Aid to Timor-Leste has though largely been delivered and managed outside of the Government’s systems, with only 7% using Government financial management and procurement systems. Only around two-thirds of TL’s aid is integrated into Government budgets9_(ibid).

traditional society, 2) the precondition for take-off, 3) the takeoff, 4) the drive to maturity and 5) the age of high mass consumption. (These stages are also popularly known as Rostows theories of development)

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1.4 Chapter summary

This chapter has presented the background of the study and provided context and deep insights into the Timor-Leste development landscape. If statistically viewed through the Human Development Indicators, Timor-Leste categorically falls under the underdeveloped status, which according to Rodney (1973) only exists if compared to other levels of development. In addition, this chapter has presented the rationale and theoretical framework that seeks to provide a theoretical lens through which this study is examined. Arguably, Neoliberal theoretical perspectives appear to dominate the post 1980’s development discourse and therefore this research will attempt to investigate whether the current forms of aid remain influenced by Neoliberal policies. The next chapter however seeks to present a concrete research methodology and research question(s) that underpin this study.

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CHAPTER 2: RESEARCH QUESTION, JUSTIFICATION, AND METHODOLOGY

This chapter constitutes the foundational pillar around which this whole research is framed. It defines the research question and specific objectives upon which the research findings are premised. Furthermore, it elaborates the justification for undertaking this research, and more specifically states the rationale for the choice of the research question and research objectives. The next sub-section defines the scope of research and presents a comprehensive and an empirically-sound research methodology that was utilized to undertake this research. Data collection methods, tools and data management techniques are further discussed.

2.1 Research Question and objectives

Whilst the focus of this study is on foreign aid, it is specifically guided by a research question that (1) underpins the whole research framework and (2) seeks to narrow and streamline the scope of study. This research question reads as follows.

Question: How has foreign aid influenced development in Timor-Leste?

To answer the above research question, the following specific research objectives are proposed since they provide direction to this study.

2.2 Research Objectives

• To understand past and current literature on aid effectiveness.

• To explore International Relations theoretical perspectives on foreign aid • To examine the impact of aid on economic, social and political development.

• To bridge the gap between three competing camps on aid effectiveness and draw theoretical consensus.

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2.3 Justification for the proposed study and choice of research question and objectives

The interest in investigating aid effectiveness in the context of Timor-Leste is largely grounded on existing theoretical approaches and models of development10. Timor-Lest is a young country that recently gained independence and given its past turbulent history, it has relied on foreign aid as vehicle for development and therefore examining the impact of such aid flows would contribute to the current debate on aid as a development tool. Second, foreign aid remains a highly contested development tool both in theory and practice and despite its success story (viewed through the prism of the marshal plan), bridging the gap within this realm of contestation and reaching an evidence-based theoretical consensus will reinforce the aid discourse and likewise generate new knowledge. Third, this research seeks to understand aid effectiveness from a South-East Asian context given the relatively few studies of this nature in the Asian region. Although aid as an institution is not new, a majority of studies on aid effectiveness have mostly been focused on the African continent, therefore drawing learnings from past studies to understand aid effectiveness in the Timor-Leste context serves to inform the aid effectiveness debate holistically. In essence, it serves to understand whether aid effectiveness is dependent on the context in which it is delivered.

In this view, understanding past literature on aid effectiveness serves to deepen insights on aid as a development enterprise. Understanding past theoretical perspectives on the rationale for aid, contested issues, interests and the politics around foreign aid will inform this study. A deepened understanding of the aid literature will further induce alternative perspectives that will guide the proposed research study. And whilst this research aims to thoroughly investigate aid effectiveness in the Timor-Leste context, an exploration of IR theoretical perspectives is critical to gain advanced theoretical insights that feed into the whole research design. Considering that aid is motivated by both altruistic and egoistic ideologies, examining the impact of aid from an economic, social and political sphere will widely inform the study. In addition, it will facilitate an orderly, well-structured and easy to understand study. Buckley et.al (1975) considers research as an orderly investigation of a

10_{Models or approaches of development include the Foreign Aid, Power centered (Down-up) development also sometimes known us ’demand driven’’}

Or (Down- Up) participatory development approach and up-down approach which largely encompassed the structural adjustments Policies of the Bretton woods institutions.

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phenomenon. Lastly, this research aims at generating informed recommendations for consideration by future Development Practitioners, Policy Makers, Governments, Civil Society and Academia.

2.4 Scope of Research and Methodology

More broadly this study discusses key development theories and revisits past literature on aid effectiveness which both provide a roadmap for the study. Within the economic, social and political spheres, sector-specific donor-funded development programs are discussed and due to the existence of multiple government sectors in Timor-Leste, only key sectors were sampled. These include, the Agricultural sector, Transport and Communication/storage, Health and Education sectors and Government and Civil Society. The reason for selection of these sectors is largely based on their inextricable link with the Human Development Indicators (HDI) as per UN measurement standards11_.

2.5 Methodology

This study utilizes a Mixed methods approach, and specifically qualitative and quantitative methods. Both primary and secondary data was sought to support existing theory. According to Creswell (2002) mixed methods designs are ‘procedures for collecting, analyzing, and mixing both quantitative and qualitative data in a single study or in a multiphase series of studies’, thus in studying aid trends, the researcher mixed available statistical data with qualitative data to feed into the overall research framework and to put theory into perspective. Accordingly, this research utilized these methods due to the following specific reasons:

2.5.1 Qualitative research method

For this specific research, qualitative research method is used for mainly four reasons. First, qualitative research seeks to contextualize theories which especially constitute the basis of this research. Carrie (2007) agrees that qualitative research fits within a poststructuralist paradigm which focuses on analyzing the aims and motives of theories and discourses. Second, using qualitative research approach in this context broadens existing theoretical perspectives, which therefore resonates with a theoretical view that qualitative research facilitates a critical inquiry and analysis of

11_{The HDI is a measure utilized by the UN to assess indicators of human development, thus a long and healthy life, access to knowledge and a good}

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information to generate theory (Cresswell p. 234). Amaratunga (2002, p. 19) also agrees that qualitative research is rich with words that describe the research subject more naturally. Third qualitative research method is used in this study because the researcher seeks to concretely put findings into an evident perspective and draw practical recommendations on aid effectiveness. In this regard, Sarakantos (1998) supports this view, in that ‘qualitative research is about studying reality from the inside not the outside’. Fourth, because qualitative research is based on inductive rather than deductive reasoning, this research will therefore seek to pause questions that are intriguing to facilitate the answering of the research question comprehensively (Carrie, 2007). Lastly since this research utilizes sub questions, qualitative research method therefore makes use of sub-questions appropriate since “they narrow the focus of the study but leave open the questioning” (Sarankatos, 1998).

2.5.2 Quantitative research method

The utilization of statistical data and graphical representations was sought in this study in order to put theory into quantifiable terms. Quantitative data was drawn from existing secondary data as opposed to collection of primary quantitative data. Since this research seeks to interpret variables, quantitative data is therefore utilized because it allows for a comparative analysis of variations between trends (Amaratunga et al., 2002). Nau (1995) also argues that quantitative methods within a specific study tends to measure ‘’how much’’ or ‘’how often’’ phenomenon occurs. Creswell (2002, p. 12) In the same view asserts that ‘quantitative research analyzes trends, compares groups, or relating variables using statistical analysis’. Thus, this study utilizes quantitative data to translate research findings into factual-based variables. Leedy et al. (2001, p. 102) for instance agree that ‘the intent of quantitative research is to establish, confirm, or validate relationships and to develop generalizations that

contribute to theory’. Arguably this research aims at validating theory through quantifiable variables.

2.6 Data Collection Methods

In undertaking this study, both primary and secondary data was collected. For secondary data, documents such as Country strategic documents, program reports and project evaluation reports were reviewed. National policy frameworks and donor strategic documents were also widely consulted. In addition, academic articles, journals and publications were utilized and relevant data was extracted. As far as primary data is concerned, the following research methods were utilized to collect such data.

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2.6.1 Key Informant Interviews (KIIs)

KIIs are effective in gathering and understanding information on particular subjects. In undertaking this research, the researcher interviewed key respondents in respective government and development agencies and International organizations. A questionnaire was developed and Semi-structured interviews were administered. Interview questions were developed and aligned with the subject under investigation. Confidentiality was highly prioritized and consent was sought from respective respondents prior to administering any interview.

2.6.2 Stratified Sampling

Key informants or respondents were stratified and interviewed based on positions they held in respective organizations. The determined sample size was 8 respondents from government departments, donor agencies and International Organizations. They included Directors, Managers, and Consultants drawn from the following organizations:1) The World Bank, 2) UN women, 3) the Germany Development Cooperation, 4) the Timor-Leste Ministry of Finance (MOF), 5) International Labour Organization (ILO) 6) ChildFund Australia, 7) Care Australia and, 8) Marie Stopes International.

2.7 Data management, compilation, Analysis and transcription

Data collected was thematically analyzed using the grounded theory for analyzing qualitative data. The grounded theory is preferred because it makes it easy to triangulate data and avoid repetition during analysis. Grounded theory is also preferred because it makes interpretation of data or views simplified and therefore easy to generate a general explanation from participants (Creswell, 2002). Data from KIIs was utilized to draw empirically-sound theoretical conclusions and key excerpts from interviews were transcribed and framed in the form of quotes to put into perspective the phenomenon under study.

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This chapter has straight forwardly defined the research question that is under investigation, and stated the motivation for undertaking this research. The most compelling reason however is the fact that Timor-Leste is a young country that is transitioning from post-conflict into a development phase and therefore studying that shift is critical to understanding aid as both a development tool and as a contested development approach. On this basis, both quantitative and qualitative research methods discussed herein seek to provide an empirical ground for this study. In addition, specific research objectives have carefully been chosen to appropriately answer the phenomenon under study and therefore in accordance with research objectives 1&2, chapter 3 below reviews two literatures as follows:(1) A literature review on aid effectiveness and 2) a review of IR theoretical perspectives on aid, which both seek to provide a broad-based context to deepen the study.

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CHAPTER 3: A LITERATURE REVIEW

3.1 Introduction

This chapter reviews two distinct literatures as follows: First, a literature review on aid effectiveness which discusses empirically-informed multi-dimensional scholarly arguments on aid effectiveness and second, IR theoretical perspectives on foreign aid. The former presents three-pronged competing strands on aid effectiveness which informs this study and the latter corroborates Realist, Neorealist and Idealist perspectives on foreign aid with development theoretical perspectives as discussed in chapter one.

3.2 A literature review on aid effectiveness

Foreign aid, also known as Overseas Development Assistance (ODA) is defined by the Development Assistance Committee (DOC) of the Organization of Economic Cooperation and Development (OECD) as ‘grants and concessional loans net of repayment of previous aid loans’ (Easterly, 2003 p. 28). Burnside & Dollar (2000) however define aid as the ‘grant element of aid excluding the loan component of concessional loans which are made at extremely low interest rates’. According to the OECD, foreign aid can be classified into four different categories as follows:

a) Social Infrastructure and Services: This category of aid funds health and education programs, water and sanitation programs and the promotion of civil society organizations.

b) Economic Infrastructure: This category funds sectors such as, energy, transportation and communications sectors, including banking and other financial services.

c) Production Sectors: This category funds sectors such as the agricultural sector, forestry and fisheries, trade and tourism, mining and construction etc.

d) General Budget Support funds: This includes supports annual budgets as well as support for macroeconomic reforms12.

Since the 1960’s, aid as a development tool has continued to present mixed findings. Scholarly arguments about whether aid is effective in delivering concrete development outcomes remain controversial in the Post-neoliberal developmental regimes (Mengistu 2015). Thus, earlier empirical studies on the impact of aid on development pointed to its debilitating effects on recipient countries.

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In other words, foreign aid creates an aid dependency syndrome, leads to fiduciary risks and due to commercial tying of aid, aid fungibility and a lack of coherence between donor and recipient government policies, aid therefore as a development tool has been ineffective (Goldsmith, 2001 p. 123–148, Leiderer, 2012). However recent, research on the macroeconomic impact of aid suggest a turnaround in the aid literature (McGillivray, 2001). Morrisey (2001) in his study on aid and growth found out that aid contributes to development and growth in multiples ways; first, aid leads to increased human capacity and investments physical assets, second, foreign aid facilitates the importation of capital goods and third, through the transfer of technology, that aid facilitates technical change and enhance productivity of capital . More theoretical contributions to this debate suggest a similar line of argument. McGillivray (2001) & Easterly (2003) assert that aid actually contributes to poverty reduction or, well-being enhancement through for instance a reduction in infant mortality rates and a general improvement in life expectancy. Thus, to concretely put this debate into perspective, three strands emerge within the scholarly debate that attempt to explain the relationship between aid, development and growth.

The first strand is the Public Interest Perspective which contends that foreign aid is necessary in developing countries because it stimulates development and economic growth. Aid can increase revenues for government experiencing revenue deficits and high levels of aid (at around 40%–45% of GDP) facilitates growth if there are good macroeconomic policies. Returns to investment in aid also have the potential to generate new revenues (Bräutigam, et al. 2004 p. 260). A similar view is shared by Chenery & Strout (1996); Burnside & Dollar (2000); Hansen & Tarp (2000); Morrissey (2001); Dalgaard et al., (2004); Gomanee et al., (2005) that foreign aid supplements domestic revenues and facilitates accesses to modern technology and technical expertise, and foreign markets which are fundamental building blocks for growth and development. Bräutigam et al. (2004 p. 260) further observed that aid has the potential to improve the quality of the government in general for instance the civil service, and can result in strengthened policy frameworks and strong institutions. Goldsmith (2001) in his study on Foreign Aid and Statehood in Africa, found identical results. His findings show that Foreign aid facilitates the running of government and makes it easy for states to pay and manage basic public functions. In addition, other contributions within this strand offer a positive outlook. McGillivray et al., (2005) & Ekanayake (2014) assert that foreign aid promotes growth and facilitates poverty reduction. If utilized appropriately, it yields positive results in terms

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16 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6

Bad Policy Medium Policy Good Policy

Aid Low Medium High

of contributing to higher public spending. Burnside & Dollar (2000) also used standard cross-country regression analysis to examine the relationships between aid, economic policies, and growth of per capita GDP and their findings revealed that aid contributes to growth if there are good fiscal, monetary, and trade policies. As demonstrated in figure 1 below, the effect of aid on growth clearly depends on policy. When the existent policy is bad, the level of aid has minimal impact on growth and vise-versa.

Growth

Source: Adapted from the World Bank Policy Research Paper 3251, March 2004

The second strand embedded within this discourse is the Public Choice Perspective which contends that aid has a negative impact on development and economic growth. According to this camp, ‘aid finances consumption rather than investment, it substitutes rather than complements domestic resources, makes more difficult for good governance to develop and affects institutions’. Furthermore, leads to collective action problems and accountability challenges’ (Easterly, 2003; Bräutigam, 2004; Knack, 2004; Claudia, 2009; Mengistu, 2015). Goldsmith (2001) for instance argues that countries that rely on aid for their development hardly produce public goods. Because Aid is unearned income, recipient countries will never acquire an organized capacity to generate domestic revenues to provide public services, thus aid diminishes the fundamental values of efficient government that it seeks to restore. Accordingly, high levels of aid are associated with poor governance through the weakening of institutions and largely because of high managerial costs, that a company aid. The surge and concentration of donors for instance in aid-recipient countries leads to

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fragmentation of development programs which results in poaching of limited local capacity hence diminishing the capacity governments to provide services effectively (Bräutigam, 2004).

In addition, foreign aid results in soft budget constraints which arises when governments lose the incentive to make calculations about investments. Huge aid investments in a recipient country may consequentially sidestep the budget thus weakening prospects of strict scrutiny of government budgets13 (ibid). A more thorough view within this strand is the Moral hazard of aid. Moral hazard according to (Bräutigam, p. 263) is ‘a situation in which having an insurance policy (in this case, access to external resources) actually, induces riskier developmental behavior’. Moral hazard as a phenomenon stems from donors who seek reform and recipient governments who prefer ‘’ business as usual’’. First, it is possible that reforms that donors seek can lead to a reduction in budgetary support if not a slimming of the budget, second, high levels of aid may bring about corrupt tendencies , a lack of transparency and poor accountability and third, Countries that highly depend on aid may not utilize their sources of tax revenues which may eventually lead to a continued cycle of low revenues and fiscal deficits. (ibid, p. 263-264).

The third strand is the zero-effect narrative which contends that foreign aid has no impact on development and economic growth (Boone, 1996; Mosley, 1980; Mosley et al., 1987). Moyo (2009) shares a similar view that aid has not been effective in delivering on social and economic development outcomes in poor countries. According to him, ‘aid is easy money that fosters corruption and distorts economies, creating a culture of dependency and economic laziness’(ibid). Mengistu (2015) on the hand asserts that aid allocation to sectors that are critical for development are minimal and ineffective since only 6.5 per cent of aid disbursements has been channeled to key sectors such as the education sector, agriculture, health and infrastructure among others. Goldsmith (2001) & Mengistu (2015) argue that aid comes with conditionalities and hidden interests. Through these conditions, lending institutions are therefore forced intervene in client states that violate loans or grant conditions. In the 1980s for instance, lending was conditional on undertaking structural reforms which among others included, deregulation, public budget cuts, and embracement of the private sector. Privatization for instance opened markets to foreign investments which led to capital-outflows, –the returns to investment in aid. Deregulation on the other hand created industrial competitiveness and public

13_{Bräutigam (2004) also asserts that large amounts of aid can diminishes the principles of transparency and accountability since revenues are not}

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budget cuts led to massive lay-offs thus undermining the very development enterprise (Dang & Pheng, 2015; Jaffee, 1998 p. 152). As shown in Figure 2, below, this conceptual framework summarizes all the three assumptions and seeks to put this debate into perspective by showing the interaction between an independent variable (in this case foreign aid) and dependent variables (economy and public sector and service delivery) and the resultant impact.

Note: Foreign aid is categorized as an independent variable under the assumption that it is a constant variable and the economy, the public sector and service delivery are categorized as dependent variables under the assumption that their variation in performance is dependent on aid receipts.

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19 .

Source: Adapted from the literature on aid effectiveness

Dependent variables (Outcome variables)

Injection of Foreign Aid

Independent variable (Regressor) Dependent variables (Outcome variables)

Direct impact (Positive Assumptions) on the economy or public sector

Negative

Assumptions about the impact of aid on the economy (or

public sector) Increased revenue as a percentage of government expenditure

Low revenues and fiscal deficits (Tax evasion)

Improved infrastructure Weakened government institutions (Poaching of staff)

Improved health systems

Moral hazard (underutilization of available sources of tax

revenues

Other Assumptions (Aid has zero effect or no impact on development and economic growth because of:

Soft budget constraints (Expectation that deficits will be met by aid Reduction in poverty

Cuts in government borrowing Conditionalities tied to

aid Perpetuates corruption Creates a dependency syndrome

strengthened policy and legal

frameworks

Generation of new sources of revenues from returns to investment

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20 3.3 IR theoretical explanations of foreign aid.

The most prominent IR theories that best explain perspectives around foreign aid are Realism, Neo-realism, and Idealism.Realist theory is concerned with the idea that all the powerful states act in the international arena to maximize and secure their national interests (Siddik, 2017). Realist perspectives on foreign aid are premised on the notion of security and therefore lending for instance by financial institutions reflects geopolitical interests of powerful states (Reynaud et al., 2009). Because donors have security interests in the geopolitical world, they come up with monetary estimates of aid or concessional financing that is funneled to recipient countries, and to advance their security interests, Realists argue that donor countries use international organizations to achieve their security objectives (Lisa & Beth, 2012). Schraeder (1998 et al., p. 296) shares this view that ‘aid polices are primarily motivated by interests of nation states and because International Relations are conducted in a Hobbesian14 state of nature, national security and self-preservation become an exclusive priority of a nation state’. Foreign aid thus is less about economic development or humanitarian concerns (ibid).

Neo-realism on the other hand is concerned with how a state postures itself in the international political arena rather than in intra-state politics (Tuman 2001). Neo-realist explanation of foreign aid slightly departs from the realist account. Rather than a focus on pursuit of national security interests or self-preservation, Neo-realists argue that donors provide aid to secure their economic interests (Tuman et al., 2001 p. 89). Thus, donors give aid to create export and investment opportunities and industrial competitiveness (ibid). The Neo-realist view point is shared by Schraeder (1998) that economic-driven interest forms the core priorities of donors. Fuller (2002) also adds that the recipient’s economic potential is the key to understanding the donor dynamics because it greatly influences donor decisions on aid disbursements. Therefore, drawn from this context, the latter assumption feeds into the Neoliberal development enterprise which opened markets to foreign investments and led to capital outflows, –the returns to investment in aid.

Neo-realism however also assumes, that the powerful states in the international political arena do not act based on an altruistic ideology thus any state-sponsored humanitarian action is likely to remain egoistically motivated which therefore makes humanitarian actions less neutral (Aliyev, 2011).

14_{Hobbesian implies a state in which nation states perceive each other as enemies. It sharply contrasts from Kentian world and Lockean world. The}

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Therefore, application of neo-realist theory on humanitarianism draws the following conclusions. First, aid is more likely to deviate from the principles of impartiality, neutrality and independence in terms aid delivery when it is mixed up with international politics that is oriented towards humanitarianism. Second, neo-realist principles are not embedded in natural disaster aid assistance since according to Aliyev (2011, p. 7), ‘man-made crises or natural disasters are unlikely to serve political interests of states’.

To the contrary, the idealist theory posits that aid is used largely for humanitarian concerns for instance combating famine, alleviating poverty and hunger or promoting human rights, including promotion of education and increasing access to health services and thus aid to developing countries is solely to improve human conditions and to solve problems of underdevelopment (Fuller, 2002). This conclusion has been reached by different authors. Dowling & Hiemenz (1985, p. 540) argue that ‘countries with lower income on a per capita basis receive more aid than middle-income countries’. In other words, such allocations are considered poverty efficient and foster development aspirations of underdeveloped countries.

This chapter has presented a literature review on aid effectiveness as well as IR theoretical perspectives on foreign aid which both provide a myriad array of useful insights into this study. A common theme derived from the two reviews is that aid is driven by both purpose and motive(s). First, the three strands identified in the aid effectiveness literature, thus. 1) The Public Interest Perspective (2) Public Choice Perspective and (3) Aid has zero effect, draws only one conclusion which is: Aid is driven by purpose whose outcomes are unpredictable.

On the other hand, IR theoretical perspectives on aid suggest that aid is driven by a motive(s). The Realist, Neo-realist and Idealist explanatory perspectives explicitly state that aid is driven by security, economic or humanitarian motives. These motives can be categorized as (1) Altruistic and Egoistic as shown in Figure 3 below.

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Source: Adapted from IR theoretical perspectives on the motives of foreign aid

From a critical analysis therefore, one key emergent question that could potentially provide a pathway to bridging the gap between the three competing camps identified in the aid effectiveness literature is: Do aid motives bear a direct or indirect impact on the controversy around foreign aid as discussed in the aid effectiveness literature? Could these motives explain or answer the emergence of three competing camps on aid effectiveness? (This question is comprehensively

answered in chapter 8)

It is however worth noting that whether aid is motivated by an Altruistic ideology or Egoistic ideology, it arguably remains purpose-driven. Timor-Leste has received varying degrees of aid with a purpose to support its development goals set-out in the National Strategic Development Plan (NSDP). Chapter 4 below comprehensively provides an overview of aid flows to Timor-Leste and specifically to key government sectors.

Altrusitic ideology

Humanitarian motives

( Promotion of social ,political and economic development,)

Global Committments

( Climate Change and environment concerns, human rights)

Egoistic idealogy

Commercial or economic motives

(Promotion of donor businesses and industry)

Global Peace and Security

(National security interests and Geo-politics ) Figure 3: Taxonomy of motives for foreign aid

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CHAPTER 4: OVERVIEW OF AID FLOWS TO TIMOR-LESTE

This chapter seeks to provide a streamlined and insightful picture into the study. It gives a snapshot of aid channeled to Timor-Leste to facilitate its development cooperation efforts and discusses key government recipient sectors and the amount of aid received per sector. In accordance with OECDs classification of aid, this chapter categorizes aid delivered to key government sectors in Timor-Leste into 3 spheres as follows: (1) Economic sphere, which encompasses the Agricultural and Transport sectors, (2) the Social sphere, which includes the Health and Education sectors and (3) the Political sphere; which includes Government and Civil Society.

4.2 Context

Timor-Leste’s development cooperation efforts are largely framed around its Strategic Development Plan, which stipulates development goals to be achieved within set time-periods. Within the Timor-Leste context, aid disbursements by donors are in conformity with Timor-Timor-Leste’s 2011-2030 National Strategic Development Plan (NSDP)15 which is underpinned by four strategic pillars as follows:

1) The Social Capital pillar which aims at developing areas that include: Health and Education including a focus on Social Inclusion, Environment, and Culture and Heritage.

2) The Infrastructure Development pillar aims at the development of infrastructure such as Roads Networks, Water systems, Electricity, Seaports, Airports, and Telecommunications.

3) The Economic Development pillar is aimed at job creation and stimulating rural development, developing the Agriculture, Petroleum, Tourism, sector and strengthening Private Sector Investment.

4) The Institutional Framework pillar: Although cross-cutting, it focuses on strengthening areas such as Security and Defense, Judiciary, Public Sector Management and Good Governance, Economic Policy and Investment etc.

15_{Timor-Leste National Strategic Plan is a government plan that guides development efforts. It reflects strategic development goals of all Timorese}

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Whilst Timor-Leste’s National Strategic Development Plan represents the government’s development vision, aid allocations have overall been based on donor priorities and interest areas. Key government sectors that have highly been prioritized by donors and have increasingly received funding cumulatively since the year 2006 include the Agricultural sector (240 million), the Health Sector (256Million), the Education Sector (268 Million), Government and Civil Society (612Million) and Transport and Storage/Communication (640Million). Other non-critical but relevant sectors have received up to 568 million in aid transfers. Figure 4, below provides a summary of Aid disbursements to key government sectors.16

Figure 4: Graph showing Aid disbursements by donors per Government Sector

Source: Adapted from the Aid Transparency Portal: Ministry of Finance; Timor-Leste

In terms of Timor-Leste’s Combined Sources Budget (CSB), which is a unified state budget plus aid in off-budget grants, the CSB was US$1,684.9 million in 2014, of which US$1,500.0 million was general state budget and US$184.9 million in aid on budget grant basis. Aid therefore in off-budget grant represented 10.97% of the CSB17.In addition to aid in off-budget grants, Timor-Leste received US$31.1 million in loans in the same fiscal year, even though it was categorized as on-budget support. Concretely these categorizations feed into OECDs definition of aid as being grants

16 This information can be accessed through the website of the Timor-Leste Ministry of Finance: Access link: https://aidtransparency.gov.tl/TEMPLATE/ampTemplate/dashboard/build/index.html?language=en

17 (Ibid)

0 100 200 300 400 500 600 700 800

OTHERS TRANSPORT AND STORAGE GOVERNMENT AND CIVIL SOCIETY

EDUCATION HEALTH AGRICULTURE Millions in USD K ey G o ve rn m en t S ec to rs rec ei vi n g a id

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and concessional loans. On this a basis therefore, Figure 5 below shows Timor-Leste’s annual aid disbursements plus government contributions.

Figure 5: Funding Type

Source: Adapted from the Aid Transparency Portal: Ministry of Finance; Timor-Leste

From the above figure, it is evident that between 2006 and 2017, Timor-Leste’s aid receipts significantly increased which signaled a peak in transition from a post-conflict to a development phase, however, it is also evident that since the year 2018, Timor-Leste’s aid receipts have dramatically declined and future aid projections are less promising. Accordingly, government contributions to sectoral programs funded by donors have been minimal. However, the five key aid recipient sectors mentioned above constitute the backbone of Timor-Leste’s economic, social, and political development as categorized below:

1) Economic Sphere: The Timor-Leste Agricultural and Transport sectors fall under this category. Aid that has been channeled to the transport sector has been aimed at developing infrastructure, while aid channeled to the agricultural sector has been aimed at boosting agricultural productivity and strengthening institutional capacity as well as the capacity of relevant stakeholders. (See

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2) Social Sphere: The Timor-Leste Health and Education Sectors constitute this category: Aid to

these sectors has been channeled with the aim to strengthen institutional frameworks, systems, practices and human capacity. (See chapter six for further details).

3) Political Sphere: The Government and Civil Society though cross cutting also constitute this category: Aid channeled to government has been aimed at delivering institutional and governance reforms, and specifically to develop institutional regulatory frameworks and capacity, including the strengthening of systems to improve policy regimes in government agencies and ministries. (See chapter seven for further details).

This chapter has attempted to narrow-down the scope of study by discussing in detail, Timor-Leste’s aid receipts (on a cumulative basis), channeled to key government sectors as shown in Figure 5 above, and hence has deepened insights from the inside out. In addition, this chapter has categorized key aid recipient sectors into, economic, social and political spheres in order to ensure a well-structured and systemized study and to appropriately respond to specific research objective 3 as stated in chapter 2. Accordingly, chapter 5 below seeks to examine how aid channeled to the Agricultural and Transport sectors has impacted development in Timor-Leste.

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CHAPTER 5: AID AND THE ECONOMY

This chapter examines the impact of aid flows to Timor-Leste through an economic lens and specifically analyses the impact of aid channeled to the Agricultural and Transport sectors which have received aid in the form of budget support, cash transfers and through technical support. Donors that have largely played a critical role in funding the Agricultural sector include GIZ, the New Zealand government, USAID and the FAO. The Transport sector on the other hand has been supported by the World Bank, the ADB, JICA, the EU, Australian Government, and ILO as further discussed below.

5.2 Aid, the Transport sector and Development in Timor-Leste: A critical analysis

Looking back to Timor-Leste’s past turbulent history and its development context, its transition from a post-conflict phase towards a path of economic development has widely been donor-supported. Aid disbursements have been channeled for construction and expansion of road networks and related infrastructure, including capacity building and workforce development.18

The Asia Development Bank in close partnership with the EU, JICA have financed key infrastructure projects in Timor-Leste19. Guided by its strategy to promote inclusive economic growth and removal of infrastructure bottlenecks, ADB channeled USD 30 million20 in aid to the Ministry of Public works, Transport and communication in 2014 which facilitated the rehabilitation of 41 kilometers of road networks and upgrading of another 31.8 kilometers in the districts of Liquica to Maubara and Batugade to Maliana, and the corridor linking Dili with the Indonesian border21 .In addition, multiple projects focused on upgrading the road networks are underway, for instance Dili to Bacau highway (105Km) and Bacau to Viqueque (approximately 58 Km of road networks). A review of evaluation findings concluded that the improved road conditions have resulted in increased access to goods and timely service delivery and thus resulted in poverty reduction. Through a well-connected road

18_{This information is at the Timor-Leste Ministry of Finance website and is published by the Development Partnership Management Unit at the}

Ministry of Finance Government

19_{The ADB has since 1999 provided aid to Timor-Leste amounting to almost 380 million Dollars} 20_{This information is available the website at the Timor-Leste Ministry of Finance}

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network, efficiency in trade between districts has improved leading to increased household incomes and strengthened entrepreneurial activities hence generating new revenues through taxes for government (Asia Development Bank, 2018).

The World Bank on the other hand, having transitioned to development financing, and driven by its vision to reduce poverty, funded the construction of a highway and bridges between the capital Dili- and the district of Ainaro with funding worth USD 30 million. Based on Interviews conducted with Timor-Leste World Bank Director, he noted that the construction of the highway has strengthened resilience by minimizing the occurrence of natural disasters. Flooding for instance has been prevented due to the presence of bridges and thus strengthened livelihoods for households and farmers and further increased agricultural productivity in communities. In a related view, funding for water infrastructure and supply systems has improved access to clean water for over 1600 households. The World Bank Director reiterated that through the construction of boreholes, there has been a reduction of diseases, and living conditions and quality of life has generally improved which has contributed to a strong workforce in the labor market. Upon questioning if the World Bank as a multilateral donor had a hidden agenda or interest in Timor-Leste, the following was his response:

‘’We have no interests; we are here to achieve development objectives. The bank brings credibility as an unbiased broker – so no interests at all. We are different from bilateral agencies which may sometimes have

interests.’’

World Bank Director, Timor-Leste

Arguably if viewed through the three competing camps on aid effectiveness, the multiple benefits reported in this case reaffirms the Public Interest Perspective that aid stimulates development by improving service delivery and facilitates poverty reduction (Bräutigam et al., 2004; McGillivray et al., 2005; Ekanayake, 2014). Timor-Leste’s core network however consists of 1,426 km of national roads and 869 km of district roads and almost 70% of these roads are in very poor condition (Asia Development Bank, 2018). Against this backdrop, the World Bank Director expressed concern that although aid to Timor-Leste has positively impacted target sectors, aid injections have generally been insufficient to create an impact of a high magnitude. Accordingly, he questioned. ‘’How USD 30 million loan to Timor-Leste could have an impact of a grand scale’’. Thus, if viewed logically, this