More motorbikes and TVs mean less poverty. Maybe.

 

The Timor-Leste government released some good news on poverty in September: 

'The Xanana Gusmão Government announced the initial estimates on poverty reduction have been released from the World Bank rendering a 9% decrease in poverty from 49.9% in 2007 to 41% in 2009.'

One may be forgiven for thinking that this means Timor-Leste is finally turning the corner in tackling poverty and achieving its goal of becoming an 'upper middle-income country by 2030'.  However, a quick read of the report itself may cause us to be more circumspect. 

As the government press release acknowledges, this new poverty figure is an 'estimate'.  That is to say, they are not derived from any actual household surveys.  Instead, it is a statistical exercise using what is called the 'survey-to-survey imputation method', which is the sort of fancy language statisticians use to describe what the rest of us would call a 'guess'.  Basically, they had a look at what the 2007 survey also told them about poor people, such as: do they live in urban or rural areas, do they have durable goods (TV, motorbike), access to a water source, dirt floor rather than tiles etc.  They then updated the statistics for these underlying indicators using the closest thing to a poverty survey at hand, i.e. the 2009 Demographic and Health survey (DHS 2009), in order to extrapolate the revised poverty rate.  

They found that many indicators had not changed much (as one would expect over just two years): households are slightly smaller (5.77 people compared to 6.5 in 2007), which may be due to the continuing movement of people since peace was restored, households are slightly less urban (which is counter-intutitve as development is usually associated with increasing urbanisation); meanwhile quality of housing, education and access to water supplies are all pretty much the same as 2007 (i.e. terrible).  However, two variables stand out: TV ownership up to 22.3% from 15.3%, and motorcycle ownership almost doubling from from 6.8% to 13.2%.  It is these last two variables that seem to have caused the statistical drop in poverty from nearly 50% to an estimated 41%.  

As a cross-check, it is certainly true that certain health indicators have improved. The infant mortality rate has declined (44/1000 compared to 60/1000), and malnutrition is down to 19% from 24.5%, although percentage of underweight children is only slightly lower (45% from 48.6%).  

So, it feels intuitively correct to report that poverty has fallen, even if we have not actually gone out to the districts to ask anyone.  But the rate is still higher than it was in 2001, when the rate stood at 36%, so in almost ten years the record is not impressive. And the 2009 figure was bound to look good compared to the low base set in the 2007 survey, which was conducted soon after the 2006 conflict, when 150,000 people became internally displaced.  

However, the Gusmao government is keen to take credit for these new poverty rates, remarking that:

'The turnaround of almost 15 percent since 2006 can be considered a new global benchmark for fast tracking development and poverty alleviation in post conflict and fragile nations. From 81 countries and 167 episodes of conflict, studies show the average growth rate achieved in five years after conflict was approximately 5%, starting from a growth rate of approximately 2% during conflict; making Timor-Leste’s economic performance a milestone given the conditions from which it emerged in 2006.'

This is a bit disingenuous: it equates economic growth with poverty reduction (they are not directly and proportionately linked) and compares five year average growth rates in other countries with just two or three years of growth in Timor-Leste.  We need to wait until 2011-12 before valid comparisons can be made.  In any case, one would question how valid is a comparison between very different conflicts in different countries.  To use the conflict in, say, DR Congo as a baseline for comparison with Timor-Leste seems renders the description meaningless.  We may as well compare it to Germany's post-war recovery in 1945-60.  

What is more interesting is the lack of analysis in the World Bank report, or in the Government pronouncements, about how this poverty reduction occurred, and how it may be maintained.   Both parties admit that:

'The results and fall in poverty by nine points were attributed to strong economic performance, internal stability, increased consumption and to rapidly rising Government expenditure on social protection programs and labor based infrastructure works.'

But this seems to indicate that continued reduction may not be so won so easily.  'Internal stability' is a one-off post-conflict gain, and 'rapidly rising government expenditure' is unsustainable unless the fiscal space is being enlarged to pay for it in future.  But the post-oil GDP in Timor-Leste is still tiny.  The economy is driven by foreign aid, and it is probably the foreigners who have been responsible for much of the increased consumption.  When the aid reduces, and aid workers go home, the economy will probably face a contraction.  If tackling poverty relies upon government expenditure on 'make work' schemes being recycled as TVs and motorbikes, then I doubt the boom is sustainable.  And it seems that the World Bank has not considered the effect of the compensation paid to displaced families since 2006, which (anecdotally) has been spent on consumer durables rather than saved or invested in future production.

It is also interesting to think about the target of becoming an upper-middle income country. This will require a GNI per capita in the range of $3,856 - $11,905.  Timor-Leste's oil revenue will make this target fairly easy to achieve (current GNI / capita is around $2460), but it is likely to be non-oil GDP that will be a better arbiter of poverty rates, and that is now around $599 per capita.  Very high birth rates will also cause a drag on the GNI per capita.  A separate World Bank report shows that education in Timor-Leste is still in trouble,  pointing out that there is

'...clear evidence that many children spend years in primary schools in Timor‐Leste without learning to read'.  

It is hard to see how future poverty reduction can continue to occur in the face of poor education and unbalanced economic growth that seems to favour a small urban elite while leaving a large section of the population in slightly worse circumstances than when the Indonesians left. 

 

 

Comments

[Chris McIlrath]

Thanks. Just as well someone bothers to take a closer look at government and NGO spin.

I saw the 2009 National(Government) English Exam paper for those finishing high school in East Timor. The poor grammar, spelling and confusing wording of the multiple choice questions is shocking! At a guess it is no better this year. Paying teachers under US$5 a day has a downside.