Under the terms of the agreement, GTLeste Biotech is granted a 50-year lease over “unproductive land” with an option for another 50 years.
The government is touting the move as a major potential source of foreign cash that could generate more than 2,000 jobs.
The foreign company plans to grow sugar cane and other plants to produce ethanol.
But East Timor’s main opposition party has complained that the plan was made with little public consultation, arguing that the land in question cannot be unproductive if there are plans to grow sugar cane. Furthermore, it stressed that increasing food production is more important and that creating 2,000 jobs is not much for 100,000 hectares.
“We have learned from other countries that sugar cane plantations will have negative impacts on agriculture and farmers’' lives. Over 80 per cent of Timorese are farmers, they live on agriculture, so the land is important for them,” said Maximus Tahu, from development watchdog La'o Hamutuk. “Our concern is that the project will contribute to the destruction of land fertility.”
In its report Oxfam accuses biofuel-oriented farming of removing land valuable for growing food. This in turn has contributed to the current food price hike, pushing an additional 30 million people into poverty.
The report's author, Oxfam's biofuel policy adviser Rob Bailey, criticised rich countries for using subsidies and tax breaks to encourage the use of food crops for alternative sources of energy like ethanol.
“If the fuel value for a crop exceeds its food value, then it will be used for fuel instead,” he said. The net result is that food supplies will be reduced and prices pushed up.