Transcript Rentier State, Statism, and SoCio Political

RENTIER STATE, STATISM, AND SOCIO
POLITICAL AND SOCIO-ECONOMIC
DYNAMIC
Guteriano Neves
Departement of Research, Analysis and Documentation
Presidency of the Republic
OBJECTIVE
This presentation intends to deploy “Rentier
State” paradigm to explain current Socioeconomic and Socio-political dynamic, and
state-society relations in Timor-Leste.”
HYPOTHESIS
Through this presentation I argue that
“Understanding socio-political and socio-economic
dynamic of Timor-Leste, one cannot ignore the
impacts of Petroleum Dependency. Petroleum
revenues forms a state of Timor-Leste becomes
a “Rentier State” even the extreme one, in
which, it determines current political economy,
public institutions characteristics, and statesociety relations. It will be still the case for one
or two decades to come.
CONCEPTUAL FRAMEWORK
Rentier State
 Political Economic Concept that explain
political, economic and social dynamic in a
state where high percentage of its revenues
are derived from extrenal rents.
 Hossein Mahavy, Hazem Beblawi no Giacomo
Luciani are well-known
GENERAL PHENOMENA OF RENTIER STATE
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Statism/Developmental State: State not only
functions as regulatory body, but it is the main entity
of development. It lays down the long-term plan, and
orient other entities to follow.
In Third World Countries, it is a pragmatic decision,
given that private sector is lacking of capacity.
It fortifies state’s presence in the society and fortifies
state’s legitimacy
In some case, because state is too powerful, the regime
turns into authoritarian regime.
CONT…..
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State’s independent from domestic economy
Government plays down importance of Taxation
Dutch Disease hurts domestic production
Employment in Public Sector: Bigger, more attractive,
more Secure.
Other Sectors are to service petroleum or public sector
State institutions are to distribute resources and not to
extract revenues from domestic economy
Relations between Elites – Business – Voters
characterized as Patron-Client Relations
Middle Class: Centralized in Urban and Highly
Consumption imported goods
TIMOR IS AN EXTREME CASE OF RENTIER STATE
80.5% of GDP is from Petroleum
 93.6% of state’s revenues are expected to
come from Petroleum (2013)
 88.47% State’s annual budget is transferred
from Petroleum Fund (2013)
 54% of household wage income and 57% of
percapita monthly wage income paid by the
government
 Domestic Economy activities takes place due to
recycle of Petroleum Money
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STATISM IN TIMOR-LESTE
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Pragmatic and and Unavoidable
Strategic Development Plan
Public Sector is expected to lay down foundation for private
sector and economic diversification.
Capital Development Increased in extreme way (Between 2008
and 2013, it increased 775%, without inflation).
Recurrent Expenditure increased 136% from 2008 level (Without
Inflation)
Macroeconomic Policy: Injecting capital into domestic Market
through wage and salary, public transfers, PDD, PDL, and Goods
and Services
Increased in the Public Servants:
54.4% of national household wage income and 57% of percapita
salary income is from Government
Expansion of Social service: Education, and Health
This expansion regardless of quality,
happens because only petroleum
revenues. It takes place independently
from domestic economy. Or in other
words, domestic economy does not
contributes to this expansion as 2013
state’s Budget is 113% of non-oil
projected GDP and it contributes only
6.7% of state’s revenues this year alone .
DUTCH DISEASE AND INFLATION
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Inflation between December 2010 and December
2012, CPI increased 26% or 13% annually. Right
now, inflation in Dili still at 13%.
Expansionary fiscal policy does not match with
domestic productivity
Makes it hard for local industry to take place
ISI becomes impossible as imported goods and
services are more attractive
It hurts 50% of population who live with $40 or
less/month
Without Petroleum Fund, it would have been worse
EMPLOYMENT STRUCTURE
Public Sector employs around 40,000
 Job in Public Sector: more attractive, more
secure
 Private Sector Employs 58,000 (30% in
construction sector, and 80.5% of it are in Dili)
 Outside of these sectors are: Self-Employed,
subsistence agriculture.
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Around 50% of productive age population (15 –
64) are considered to be economically inactive
TAXATION
2008 Government reform tax policy upon
recommendation from IMF
 It was based on the fact that petroleum revenues
was already flowing into Petroleum Fund
 Therefore, even without domestic economy, state
still exist.
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Fiscal contract, and constructive roles of the society
to the state is very small.