Proposal for a Council Decision regarding the position to be taken by the Community within the ACP-EC Council of Ministers with a view to the accession of the Democratic Republic of East Timor to the ACP-EC Partnership Agreement
Date: 2003-02-18
Institutions: European Commission
Subjects: ACP-EU Council of Ministers, EU aid, East Timor, agreement (EU), development aid, economic situation, political situation, socioeconomic conditions

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 18.2.2003
COM(2003) 76 final

Proposal for a

COUNCIL DECISION

regarding the position to be taken by the Community within the ACP-EC Council of
Ministers with a view to the accession of the Democratic Republic of East Timor to the
ACP-EC Partnership Agreement

(presented by the Commission)

EXPLANATORY MEMORANDUM

Article 94 of the ACP-EC Partnership Agreement (hereinafter referred to as ‘the Agreement’)
describes the procedure for acceding to the Agreement.  Four  requirements are necessary for
Article 94 to take effect:

(1) 

that the State concerned is independent;

(2) 

that the State concerned submits a request for accession;

(3) 

(4) 

that the request for accession is presented to the Council of Ministers;

that  the  structural  characteristics  and  economic  and  social  situation  of  the  State
concerned are comparable to those of the ACP States.

East  Timor  now  fulfils  these  conditions.  In  1999,  following  24  years  of  occupation,  East
Timor  voted  overwhelmingly  in  favour  of  independence.  On  20  May  2002,  East  Timor
became an independent nation and the 191st Member of the United Nations.

By the end of May 2002, the Secretary General of the ACP Group of States and the President
of the EU Council of Ministers received the official request of accession, dated 9 May 2002.
The  request  of  East  Timor  for  accession  includes  a  request  to  obtain  observer  status  in  the
ACP-EC organs, pending a decision on the accession. The Council of Ministers, at its meeting
in  Punta  Cana  on  28  June  2002,  formally  acknowledged  the  request  and  decided  to  accord
East Timor observer status in the ACP-EC organs during the period its membership request is
under consideration.

Following  the  widespread  devastation  of  infrastructure  after  the  referendum  vote  for
independence, East Timor found itself deprived of public administration, of workable schools
and  of  social  services,  and  economic  activity  was  completely  disrupted.  East  Timor  is  the
poorest  nation  in  the  Asia-Pacific  region  and  among  the  20  poorest  countries  in  the  world,
with  an  estimated  GDP  per  capita  of  only  €459  in  2001.  The  UNDP  National  Human
Development  Report  2002  for  East  Timor  indicates  that  nearly  half  of  the  population  of
800,000  (and  most  of  the  women)  live  in  income  poverty  -  having  less  than  the  national
poverty line of $0,55 per day; life expectancy is only 57 years; about 45 percent of children
under five years of age are underweight, and maternal mortality is high.

The economy  is  characterised by several factors.  Firstly, the  country has very  low  levels  of
development  in  rural  areas.  Most  of  the  population  still  relies  on  subsistence  farming  or
fishing, with uncertain and low incomes. Inequality of income distribution has been and still
is low, given the generally very low incomes of nearly all the population. But the difference
between urban  and  rural  incomes  is  beginning  to  open  up.  Secondly,  the  social  economy  is
highly  segmented;  a  vast  majority  of  poor  rural  farmers  and  a  separate,  better-off,  urban
economy. Thirdly, in terms of public revenues, East Timor will remain dependent on external
financing for the next few years. Some significant advance tax revenues from the offshore gas
and oil fields have already started to flow. In the longer term from 2004 significant revenues
from  these  offshore  oil  and  gas  fields  in  the  Timor  Sea  will  come  on-stream  in  2004/2005.
The amounts of these are known to be large but are as yet uncertain.

Since East Timor is a least-developed, small, isolated island and a new nation, the creation of
a  sustainable  economic  base  poses  a  daunting  challenge.  The  rebuilding  of  society,  public

2

institutions and infrastructure are the necessary foundations for a sustainable socio-economic
basis for the longer-term.

The independence of East Timor has opened up new prospects for EC-East Timor relations.
The European Community has contributed generously to humanitarian relief, the setting up of
the  UN  transitional  administration,  and  to  rehabilitation  programmes  implemented  through
the  Trust  Fund  for  East  Timor.  The  EC  should  continue  providing  economic  support  to  the
country  with  the  aim  of  fostering  political  stability  and  consolidating  democracy.  Relations
between  the  EC  and  East  Timor  should  be  conducted  on  a  contractual  basis  that  will
consolidate present links and give a continuous and cohesive framework to Community aid,
and  also  to  widen  EC-Pacific  relations.  There  are  in  principle  no  obstacles  to  the
establishment of relations between the European Community and East Timor.

The  Commission  therefore  proposes  to  give  favourable  consideration  to  the  request  by  the
Democratic Republic of East Timor for accession to the ACP-EC Partnership Agreement, as a
prospective member of the Pacific group.

Political considerations

On 20 May 2002, the  Democratic Republic  of  East  Timor became  the  191st  Member  of  the
United Nations.

The independence of East Timor is to be seen in the light of the progress made over the past
three  years  in  restoring  political  and  economic  stability  after  its  traumatic  liberation  from
Indonesia. The foundations of a functional state were laid during the two and a half years that
East Timor was under UN administration, after centuries of Portuguese colonial rule and 24
years of Indonesian occupation. In a referendum under the auspices of the United Nations on
30 August 1999, 78 percent of voters rejected enhanced autonomy within Indonesia and opted
for  independence.  The  events  that  followed  resulted  in  the  widespread  destruction  of
infrastructure and housing. Government institutions ceased to function and more than 250,000
people out of a population of 800,000 were displaced, going mostly to West Timor.

Since then East Timor’s volatile situation has been stabilised by massive external assistance
delivered under the umbrella of UN peacekeeping and the UN Transitional Administration in
East Timor (UNTAET). Since September 1999, the international community has mounted one
of  the  largest  humanitarian  and  rehabilitation  operations  ever.  Co-ordination  among  donors
has  been  exemplary.  The  European  Community  has  massively  contributed  to  humanitarian
relief,  to  the  set  up  of  the  UNTAET,  and  to  the  rehabilitation  programme  implemented
through the Trust Fund for East Timor. A two-year UN successor mission with scaled-down
peacekeeping, police and civilian components will provide some continuity and stability.

Over the past three years, the country has achieved a remarkably swift recovery and transition
to  independence.  Before  independence,  with  the  help  of  the  UN  and  financed  by  the
international community including the EU, East Timor has conducted peaceful multiparty and
presidential elections and has adopted a new Constitution. It led the beginnings of economic
recovery and the  restoration of  core services delivery. The new  government took over  from
UNTAET on Independence Day 20 May 2002. The new government has also developed and
published a long-term National Development Plan and has agreed on a financing strategy that
will bridge the budget deficit for the next three  years, pending the realisation of oil and  gas
revenues from the Timor Sea.

3

The effects of  the  colonial  period  followed  by  Indonesian  occupation  have  resulted  in  huge
political  challenges  today.  First,  the  rehabilitation  and  the  reconstruction  of  destroyed
infrastructure  have  to  be  completed.  Second,  introducing  democracy,  justice  and  nation
building, i.e.  coping with past  human  rights  abuses  and  reconciling  the  various  antagonistic
social  groups  of  society,  while  creating  appropriate,  democratic  mechanisms  for  conflict
resolution. The country needs to implement a legal framework to manage everything from the
justice system to property ownership. Third, encouraging long-term development, i.e. mainly
dealing with poverty and capacity building, and promoting economic growth, thereby creating
a sustainable livelihood for the population.

East  Timor’s  future  capacity  to  attract  the  resources  to  finance  its  own  development  will
depend on, firstly, external aid flows over the next few years and, secondly, the development
and coming on line of offshore oil and gas revenues. These have already come on stream in
terms of advance payments of tax in 2002 and are unlikely to become very significant from
2004 onwards. Some external development assistance will be needed over the next five years
in  order  to  help  establish  a  basic  social  safety  net,  establish  schools  with  basic  operating
levels, and build capacity in state health services (EC aid already committed before end-2002
is  taking  care  of  the  health  sector's  financing  needs  until  end-2004).  The  country  enjoys
significant supportive roles from the donor community. As an independent state it has become
a  member  of  the  International  Monetary  Fund,  of  the  World  Bank  and  of  the  Asian
Development Bank, but it has decided not to borrow against its future oil and gas revenues.

East Timor’s capacity to consolidate the gains won during the transitional period will depend
on  sustained  international  donor  commitment,  UN  support,  and  the  ability  of  its  leaders  to
craft  a  distinct  international  identity.  Much  will  also  depend  on  their  ability  to  meet  the
pressing economic needs of an impoverished population.

Economic and social situation

East  Timor  is  one  of  the  poorest  nation  in  the  Asia-Pacific  region  (but  it  is  not  as  poor  as
several other landlocked and post-conflict states on the mainland of Asia) and East Timor is
among the 20 poorest countries in the world. In 2001 the estimated GDP per capita was only
€459. At present 41 percent of the population live below the poverty line which is set at only
$0.55 per day; life expectancy is only 57 years; about 45 percent of children under five years
of  age  are  underweight,  and  maternal  mortality  is  high,  some  420  women  die  out  of  every
100,000 live births.

East Timor is a least-developed, small, isolated island and a new nation, whose development
challenge  is  compounded  by  the  wholesale  destruction  of  1999,  by  the  challenge  of
establishing institutional systems and frameworks, a need for reconciliation, and by the very
limited  economic  base  and  market  size.  It  needs  to  strengthen  core  service  delivery
institutions,  for  example  in  health  and  education,  and  ensure  that  the  capacity  is  there  to
manage  them  efficiently.  Gaps  in  these  areas  constitute  severe  constraints  for  future
development.
One  of  the  pressing  constraints  for  East  Timor’s  development  effort  is  its  limited  human
capacity.  Many  East  Timorese  worked  in  the  previous  administration  but,  frequently,  the
more  senior  positions  were  held  by  non-East  Timorese  and  many  of  the  important  policy,
expenditure, and administrative  decisions  were made outside  East Timor. Consequently, the
human  resources  required  to  manage  all  facets  of  government  need  to  be  built  up  and  the
development needs,  especially  in basic social services such  as  health  and  education,  remain
very high.

4

The Government is strongly committed to developing the country and improving the lives of
its people. The National Development Plan outlines strategies for the next five years (2003 to
2007)  with  sustained  economic  growth  and  poverty  reduction  as  the  overriding  goals.
However,  with  the  phasing  down  of  the  UN  presence  and  the  Trust  Fund  for  East  Timor
(TFET),  the  outlook  for  key  components  of  the  economy  is  not  very  favourable  and  donor
support will be crucial to smooth the difficult transition in the economy.

Over the past two and a half years, under the guidance of the UNTAET, the country has seen
gradual  improvements  in  governance,  infrastructure  and  the  basic  public  services  that  are
crucial to sustain the livelihood of the population. This has been achieved through a uniquely
successful  partnership  between  the  UN  Agencies,  the  international  donor  community,  the
World Bank and the Asian Development Bank. The improvements include the holding of both
parliamentary  and  presidential  elections,  putting  in  place  programmes  to  support  the  re-
establishment  of  the  judicial  system,  restructuring  and  developing  the  civil  service  and
institutional  strengthening  of  the  parliament.  It  has  improved  the  capacity  of  civil  society
organisations to play their part in the political process and in nation building.

Having become a sovereign nation only in May 2002, East Timor is yet to find its own niche
in regional and global partnerships. Logistically, East Timor sees its natural regional structure
base within APEC and ASEAN, as well as in the Pacific region.

From the recent history and the political, economic and social situation outlined above, it can
be  concluded  that  the  structural  characteristics  and  economic  and  social  situation  of  East
Timor are comparable to those of the ACP States and thus reflect the requirements of Article
94 for accession to the ACP-EC Partnership Agreement.

EC Assistance

Over the last couple of years East Timor has passed rapidly from being a relatively neglected,
very  poor  territory  occupied  by  Indonesia  through  a  catastrophic  period  of  social  and
economic  crisis  into  the  present  phase,  with  huge  amounts  of  aid  and  expenditure  being
provided  and  peacekeeping,  UN  and  donor  personnel  being  present  in  the  country.  A
significant portion of the committed aid for East Timor remains at this time in the process of
disbursement and implementation.

The European Commission, through its multi-faceted approach, is one of the major donors to
East  Timor.  Between  August  1999  and  the  end  of  2002,  the  European  Commission  has
allocated  €137  million  of  grant  aid  to  help  East  Timor  to  meet  its  very  real  needs  for
emergency  aid,  transitional  administration,  and  rehabilitation  and  reconstruction.  This
represents over €170 per capita. These contributions can be summarised as follows:

(cid:1)  World Bank Trust Fund for East Timor : €56 million;

-  Purpose:  contributing  to  the  Trust  Fund  for  East  Timor  (TFET)  allows  co-ordinated
action,  particularly  in  health  and  infrastructure.  The  TFET  is  the  donor-funded  common
vehicle for the rehabilitation of East Timor. The World Bank and the Asian Development
Bank are managing this Fund.

(cid:1)  UNTAET : €10 million;

-  Purpose:  direct  financial  support  to  the  United  Nations  Transitional  Administration  in
East Timor;

5

(cid:1)  ECHO : € 42 million;

-  Purpose:  health,  food  and  water  and  sanitation  supply,  through  contracts  with
international NGOs;

(cid:1)  FOOD AID : €8.5 million;

- Purpose: delivery of food supplies implemented through WFP’s “Food for Work” action;

(cid:1)  ELECTIONS : €1.5 million;

-  Purpose:  dispatch  of  an  observer  team  and  support  to  civic  education  through  local
NGOs;

(cid:1)  Health projects: €19 million;

-  Purpose:  continuation  of  the  Commission’s  previous  financing  and  leading  presence  in
the health sector (already established under TFET and ECHO) and in the rural areas.

These high funding levels were justified by emergency and rehabilitation needs.  From 2003
onwards,  East  Timor  will  move  into  a  phase  of  long-term  development  assistance.  The  EC
plans to allocate €10 million for 2003 and €8 million for 2004.

EC Member States have been strongly involved in the  reconstruction effort. Due to its long
historical  links  with  East  Timor,  Portugal  has  been  at  the  forefront  of  this  effort.  Other
Member States (United Kingdom, Germany, Finland and Ireland) have also contributed.

Future relations between the EU and East Timor

Future development assistance could be ensured by the accession of East Timor to the ACP-
EC  Partnership  Agreement,  thus  providing  a  contractual  basis  for  and  continuity  to  the
partnership.  East  Timor  fulfils  the  conditions  for  membership  of  the  ACP-EC  Partnership
Agreement.

The  Commission  proposes  to  allow  East  Timor  to  have  access  to  the  financial  resources,
which  will  be  provided  in  the  framework  of  the  ACP-EC  Partnership  Agreement  under  the
next  Financial  Protocol,  that  is  for  the  period  2005-2010.  However,  in  order  to  ensure  the
smooth  operation  of  9th  EDF  regional  programmes,  East  Timor  should  have  access  to  the
financial  resources  provided  under  Article  3(b)  of  the  Financial  Protocol  in  Annex  I  of  the
ACP-EC Partnership Agreement. Until East Timor has access to the financial resources which
will  be  provided  in  the  framework  of  the  ACP-EC  Partnership  Agreement  in  the  form  of  a
grant  for  the  national  indicative  programmable  allocation,  it  will  continue  to  benefit  from
ALA funds.

Given  that  East  Timor  is  a  least-developed  country  and  should  be  enabled  to  overcome  the
serious economic and social difficulties hindering its development so as to step up its rate of
development, the Commission proposes to include East Timor in the lists of Least-developed
ACP States and of Island ACP States, according to Articles 85(2)(a) and 89 of the ACP-EC
Partnership Agreement.

Conclusion:

The  Commission  proposes  that  the  Council  adopt  the  following  Decision  regarding  the
position to be taken by the Community within the ACP-EC Council of Ministers with a view
to  the  accession  of  the  Democratic  Republic  of  East  Timor  to  the  ACP-EC  Partnership
Agreement.

6

Proposal for a

COUNCIL DECISION

regarding the position to be taken by the Community within the ACP-EC Council of
Ministers with a view to the accession of the Democratic Republic of East Timor to the
ACP-EC Partnership Agreement

THE COUNCIL OF THE EUROPEAN UNION,

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular  the
second subparagraph of Article 300(2) in conjunction with Article 310 thereof,

Having  regard  to  the  Internal  Agreement  of  18  September  2000  on  the  financing  and
administration  of  Community  Aid  under  the  Financial  Protocol  to  the  ACP-EC  Partnership
Agreement, and in particular Article 1 thereof,

Having regard to the proposal from the Commission1,

Whereas:

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

Article  15  of  the  ACP-EC  Partnership  Agreement  (hereinafter  referred  to  as  “the
Agreement”)  establishes  a  Council  of  Ministers  with  decision-making  powers
determined by the Agreement;

The Democratic Republic of East Timor has presented a  request for accession to  the
Agreement, in accordance with Article 94(1) of the Agreement;

East Timor fulfils the conditions for Membership provided for in Article 94(1) of the
Agreement and the request for accession should therefore be approved;

The  participation  of  East  Timor  should  be  subject  to  the  temporary  specific
arrangement that East Timor benefits from the Community’s financial assistance to the
ACP States provided under Article 3(b) of the current Financial Protocol in Annex I to
the Agreement for the period of 2000-2005;

The lists of Least-developed ACP States and of Island ACP States in Annex VI of the
Agreement  should  be  amended  in  accordance  with  Articles  85(2)(a)  and  89  of  the
Agreement so as to include East Timor;

The  Community’s  position  within  the  Council  of  Ministers  regarding  the  latter’s
adoption  of  a  Decision  regarding  the  accession  of  the  Democratic  Republic  of  East
Timor to the ACP-EC Partnership Agreement should be determined;

1

OJ C […], […], p. […].

7

                                                
HAS DECIDED AS FOLLOWS:

Sole Article

The  Community’s  position  within  the  Council  of  Ministers  regarding  the  accession  of  the
Democratic Republic of East Timor to the ACP-EC Partnership Agreement shall be based on
the draft Decision annexed hereto.

Done at Brussels, […]

For the Council
The President
[…]

8

ANNEX

Draft of a

DECISION OF THE ACP-EC COUNCIL OF MINISTERS
regarding the accession of the Democratic Republic of East Timor
to the ACP-EC Partnership Agreement

THE ACP-EC COUNCIL OF MINISTERS,

Having  regard  to  the  ACP-EC  Partnership  Agreement  (hereinafter  referred  to  as  “the
Agreement”), signed in Cotonou on 23 June 2000, and in particular Article 94(1) thereof,

Whereas:

(1) 

(2) 

(3) 

(4) 

The Democratic Republic of East Timor has presented a  request for  accession  to the
Agreement, in accordance with Article 94(1) of the Agreement;

East Timor fulfils the conditions for Membership provided for in Article 94(1) of the
Agreement and the request for accession should therefore be approved;

The  participation  of  East  Timor  should  be  subject  to  the  temporary  specific
arrangement that East Timor benefits from the Community’s financial assistance to the
ACP States provided under Article 3(b) of the current Financial Protocol in Annex I to
the Agreement for the period of 2000-2005;

The lists of Least-developed ACP States and of Island ACP States in Annex VI of the
Agreement  should  be  amended  in  accordance  with  Articles  85(2)(a)  and  89  of  the
Agreement so as to include East Timor;

HAS ADOPTED THIS DECISION:

Article 1

The  accession  of  the  Democratic  Republic  of  East  Timor  to  the  ACP-EC  Partnership
Agreement is hereby approved.

Article 2

The  participation  of  East  Timor  in  this  Agreement  is  subject  to  the  temporary  special
arrangement that East Timor only benefits from the Community's financial  assistance to the
ACP  States  provided  under  Article  3(b)  of  the  current  Financial  Protocol  in  Annex  I  to  the
Agreement for the period of 2000-2005.

Annex  VI,  Articles  1  and  5  shall  be  amended  by  adding  East  Timor  to  the  lists  of  Least-
developed ACP States and of Island ACP States.

Article 3

9

Article 4

The  accession  of  the  Democratic  Republic  of  East  Timor  to  the  ACP-EC  Partnership
Agreement shall  enter into  force on the first  day  of  the  second month  following the date of
deposit of the act of accession of the Democratic Republic of East Timor.

Done at Brussels,

For the ACP-EC Council of Ministers
The President

10