State-building effort is a continuous process in post-conflict countries. Since 2002,
Timor-Leste has been in the process of its state-building endeavor with the support of the
international community. Most of the foreign aid to the country has been for the purpose
of state-building projects, the result however is a mixed record. Considerable criticisms
have pointed towards donors’ lack of concern regarding the state-building needs of the
recipient country, as too much focus has been placed on their national interest. In recent
years, Australian and Chinese aid has come under criticism. Critics have argued that
important issues like poverty reduction and social and economic development have
become secondary to both countries’ national interests. This study explores the two
countries’ long-term goals in Timor-Leste by comparing and contrasting their aid
programs to state-building initiatives from 2002-2011. It found that the two countries have
differences in their aid programs as well as commonalities in terms of their approach to
aid projects and programs and their national interest. The study argues that both
countries’ aid has been used as currency for buying time, political influence, and the
hearts and minds of the Timorese for the purpose their long term goals. Foreign aid serves 4
as a soft power instrument for maintaining the two countries’ geopolitical and geostrategic
interests and future influence and for achieving economic opportunities in the region. The
government of Timor-Leste needs to play a “smart diplomacy” card, continue to befriend,
and open to all countries, while maintaining balanced relations between Australia and
China and at the same time strengthen its coordination role at home by taking a more
active and effective leadership role in the management of international assistance for the
purpose the country’s state-building needs.