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Timor-Leste (East Timor)

Political sketch

Also called Timor Leste, its Portuguese name. Independent on 20 May 2002.

The Portuguese began trading with Timor, probably for sandalwood, about 1520. In 1613 the Dutch established themselves in the southwest of the island while the Portuguese moved to the north and east. Treaties between Portugal and the Netherlands effective in 1860 and 1914 set the boundaries that existed until 1975. Portugal received the northeastern part plus an enclave. In the early 1800s, with sandalwood scarce, the Portuguese introduced coffee, sugar cane, and cotton. Even so, East Timor so poor that before the Second World War, Dili, the capital, had no central electricity or water supply. During the Second World War, Portugal declared neutrality, but Allied troops landed there in December 1941, occupying the territory, and the Japanese invaded in February 1942. The Japanese occupation was destructive. After the war, the Portuguese government made some effort to promote East Timor's economic development.

Following the democratically inspired leftist military revolution that overthrew Portugal's dictatorship in April 1975, East Timorese were given the freedom to form their own political parties. On 11 August 1975 the more conservative parties launched a coup to take power from the Portuguese and deny power to the left-wing Front of Independent East Timor (Fretelin). After fighting that cost 2,000 lives, Fretelin won the struggle. On 28 November 1975 the government declared East Timor independent. On 7 December 1975 Indonesia invaded and occupied East Timor, supposedly out of a fear that East Timor would become a hotbed of communism. The East Timorese put up a guerilla resistance. Indonesia killed 100,000 or more East Timorese by war, execution, famine, and disease, and forced considerable numbers into refugee camps. Indonesia also moved some Indonesians into East Timor. Indonesia annexed East Timor as the province of Timor Timur on 17 July 1976.

In May 1998 Indonesia's dictator Suharto resigned from office during the East Asian currency crisis. The new government promised to hold a referendum in East Timor to ask whether the populace supported independence. The referendum, held on 30 August 1999, overwhelmingly supported independence, which Indonesia granted on 19 October 1999. However, the Indonesian government did nothing to restrain bloody rampages by Indonesian militia groups opposed to independence. Elements of Indonesia's military in fact supported the militias. A United Nations force led by Australian troops landed on 20 September 1999 and established control over East Timor after fighting the militias. East Timor became a protectorate of the United Nations until achieving full self-government on 20 May 2002 under a fledgling democracy. East Timor remains a very poor, mainly agricultural economy, but deposits of oil and gas lie offshore, though Australia contests their ownership.

Wars since 1500

East Timor Rebellion of 1861; East Timor Rebellion of 1867; East Timor Rebellion of 1868; East Timor Rebellion of 1887; East Timor Rebellion of 1893; Manufahi War, 1894; Manufahi Revolt, 1911-1912; Second World War in the Pacific, 1942-1945 (Japan against United Kingdom, United States, China, Australia, New Zealand, Netherlands, and allies); Viqueque Rebellion, 1959; East Timorese Civil War, 1975; Indonesian Invasion of East Timor, 1975; Timorese Guerilla War, 1975-1998; Indonesian Terrorist Insurgency in East Timor, 1999.

Convertibility

Portuguese colonies:

Portugal introduced exchange controls on 24 September 1914 and revoked them on 18 October 1937. There were also a few controls from perhaps 1939 to 1947. Controls were intensified in the summer of 1947, made extensive on 9 February 1948, and removed on 1 January 1993, long after Portugal had ceased to have any colonies except the Chinese city of Macau.

The escudo, introduced in Portugal in 1911 and in its African colonies in 1914, was a chronically weak currency until the currency reform of 1928. The Banco Nacional Ultramarino, Portugal's private monopoly note-issuer for its colonies, was not required to keep its colonial currencies at par with the Portuguese escudo, though its revised charter of 31 November 1901 did require it to accept notes of one branch at any other branch at a discount of no more than 2%, except regarding Mozambique. (The bank did not issue notes in Portugal.) In 1948 the separate colonial foreign-currency funds were centralized in Lisbon. The currency reform of 1953 unified the Portuguese escudo and the currencies of the Portuguese colonies, making them a true currency area similar to the sterling area or the French franc zone (Portugal, law of 27 June 1953). A Monetary Fund of the Escudo Zone was established by Portugal, Decree-Law 44/703 of 17 November 1962 (reprinted in Banco de Portugal annual report 1962: 129-40). On 21 February 1963 Portugal issued a ministerial decree liberalizing capital m ovements in the escudo zone (IMF ARER 1963: 313). On 1 March 1963 measures were taken to organize a new payments system for the zone (IMF ARER 1964: 390). However, Angola and Mozambique were persistently in deficit to the fund. The result was that high-priority payments were settled immediately at 1 overseas escudo = 1 Portuguese escudo, while low-priority payments experienced delays, which were a form of rationing, until the funds were available to settle them at the official rate. Exchange controls on private transfers from overseas territories to Portugal were imposed by Portugal, Decree-Law 478/71 of 6 November 1971 (reprinted in Banco de Portugal annual report 1971, v. 2: 55-67).

Territories occupied by Japan during the Second World War:

During the Second World War, French Indochina (Cambodia, Laos, and Vietnam) and Thailand, though occupied by Japanese troops, did not have Japanese occupation currency; rather, they paid a kind of ransom by creating domestic currency and giving it to Japan to pay for local expenses. In Burma, Hong Kong, western Indonesia (Sumatra and Java), and the Philippines, the Yokohama Specie Bank acted as the issuing agent of occupation currency and the de facto central bank. The Bank of Taiwan had the same capacity in Oceania and eastern Indonesia. The Bank of Japan was made the central bank for the Greater South East Asia Co-Prosperity Sphere by a Japanese law of July 1942, but Japanese occupation currencies were not officially all pegged to one another and to the yen until 1943, when the rate was established at 1 Japanese yen = 1 military yen (China) = 1 Burmese rupee = 1 Javanese gulden = Malayan $1 = 1 Philippine peso = 1 Thai baht = 2 Japanese Oceanic shillings, and 1 Indochinese piastre = 0.976 Japanese yen (Bányai 1974: 8). On 1 April 1942, Japan opened the Southern Development Bank (Nampo Kaihatsu Kinko), which had its headquarters in Tokyo and, from 1 July 1942, a primary regional office in Singapore (renamed Shonan by the Japanese). The Southern Development Bank became the official central bank of the Japanese occupation at various dates in 1943 and 1944 for Malaysia, Indonesia, the Philippines, and Singapore, but this was mainly an administrative change. Notes continued to be printed with the same appearance and the Yokohama Specie Bank and Bank of Taiwan continued as the agents for issuing occupation currency and regulating other banks. Although these currencies were part of a currency zone based on the Japanese yen, convertibility between any pair of currencies was restricted. Taiwan, Korea, and Manchuria were also parts of the Japanese yen currency zone through their older pegs to the yen.

East Timor alone:

UNTAET Regulation No. 2000/2, issued and effective 14 January 2000, permitted parties to make payments in any mutually agreeable currency and removed all foreign-exchange controls inherited from Indonesia.

Other

Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): None.

Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): None.

Frankel and Rose (1996) list of currency crashes: Country not listed.

No exchange rate data in Reinhart and Rogoff (2003).

References

Primary sources:

--Laws and decrees:

East Timor. Gazette. 1900-1975, 1999-present. Boletim official do Districto Autonomo de Timor (1900-1951); Boletim oficial de Timor (1951-1975); The Official Gazette of East Timor / Boletim Oficial de Timor-Leste / Diáriu Ofisial Timor Lorosa'e (1999-2002); Jornal da República Democrática de Timor-Leste (2002-present). Dili (also spelled Dilly in early years): Imprensa Nacional (1900-1975, 2002-present). Recent issues at <http://www.jornal.gov-rdtl.org>. (From 1975-1999 East Timor was part of Indonesia, for which see its gazette. Since 2002, also published in Tetum, a local language.)

Indonesia. Gazette. 1950-present. Lembaran negara Republik Indonesia. Jakarta. (Succeeded by the United Nations Temporary Administration in East Timor.)

Portugal. Gazette. 1715-present. Diário do governo (1715-1974); Diário da república (1974-present). Lisbon. Recent issues are online at <http://dre.pt/>.

United Nations Temporary Administration in East Timor (UNTAET). Regulations issued are listed on its Web site, below. (Succeeded by the government of independent East Timor and its gazette.)

--Publications of monetary authorities:

Banco Nacional Ultramarino. 1964a. Leis, estatutos e normas regulamentares de um século de actividade, 1864-1964. Lisbon: Banco Nacional Ultramarino. (Concerns Portuguese colonies.) (I have not seen this.)

Banco Nacional Ultramarino. Annual report. 1865-1999. Relatório do Banco Nacional Ultramarino. Lisbon: Banco Nacional Ultramarino. In English as Annual Report, 1973-1999? Lisbon: Banco Nacional Ultramarino. From 1920-1960 a separate volume appeared, entitled Relatório do Governo do Banco, parecer do Conselho Fiscal, balanço e contas referentes ao exercício de ....

Banco Nacional Ultramarino. Bulletin. 1950-1999?. Boletim trimestral. Lisbon: Banco Nacional Ultramarino.

Bank Indonesia. Annual report. 1968-present. Annual Report (English). Jakarta: Bank Indonesia.

--Web site of the current monetary authority (viewed January 2005):

East Timor (Timor-Leste). Ministry of Planning and Finance. Web site, <http://www.mopf.gov.tp> (viewed 6 March 2005). (The ministry issues the country's coins.)

<http://www.federalreserve.gov>

--Other publications or Web sites:

United Nations Temporary Administration in East Timor (UNTAET), <http://www.un.org/peace/etimor/etimor.htm> (viewed 6 March 2005).

Main secondary sources:

Banco Nacional Ultramarino. [1964b.] Cem anos de actividade. Lisbon: [Banco Nacional Ultramarino.] English edition A Century of Banking. (Concerns Portuguese colonies.) (I have not seen this; it may be short.)

Bányai, Richard A. 1974. Money and Banking in China and Southeast Asia During the Japanese Military Occupation 1937-1945. Taipei: Tai Wan Enterprises Company, Limited.

Gunn, Geoffrey C. 1999. Timor Loro Sae: 500 Years. Macau: Livros do Oriente.

IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.)

Schwan, C. Frederick and Joseph E. Boling. 1995. World War II Remembered: History in Your Hands--A Numismatic Study. Port Clinton, Ohio: BNR Press.

Monetary authorities: East Timor (Timor-Leste)

Exchange rate arrangements: East Timor (Timor-Leste)