Economy and business in East Timor
COUNTRYAAH, 41.8 percent of the
population lives below the poverty line (2014). With this,
East Timor is among the 36 poorest countries in the world
and the poorest country in Southeast Asia. The economy is
mainly based on the production and export of oil and gas.
Before the Portuguese colonial administration's break-up
in 1975, East Timor was the least developed area in both
East and Southeast Asia. As a result of the Indonesian
invasion and the subsequent guerrilla activity, the economy
was further deteriorated, which at times resulted in famine
disasters. However, the Indonesian authorities made
significant investments in agriculture and transport, as
well as in educational and health institutions.
During the armed conflict in 1999, the banking system
collapsed. At independence in 2002, the US dollar was
introduced as the official currency, but in November 2003
the first Timorese centavos coins also came into
circulation. In the same year, the first three commercial
banks in Dili also opened.
A trade union was formed in 2001. The International Labor
Organization (ILO) has established an authority for labor
market issues, introduced labor law and rules for the
Oil and gas
In the 1990s, rich petroleum deposits were detected in
the Timor Sea between East Timor and Australia. A disputed
sea area southeast of East Timor, the so-called Joint
Petroleum Development Area (JPDA) is jointly
managed by East Timor and Australia. Agreements concluded
between the two countries in 2001 and 2006, East Timor
secures 90 percent of the royalty revenues from the Bayu
– Undan and Greater Sunrise JPDA gas fields.
The 2006 agreement postpones the final setting of national
boundaries within JPDA for 50 years.
The Bayu – Undan field has been under development since
the turn of the millennium with Phillips Petroleum as the
operator. The gas is piped to Darwin in Australia. East
Timor is working on plans to build a pipeline from the
Greater Sunrise field to Beaco on the south coast of
East Timor with a view to building a petrochemical plant and
establishing other industrial activities in this area.
Petroleum revenues account for about 90 per cent of East
Timor's revenue stream, which in June 2005 established the
Timor-Leste Petroleum Fund. The fund was
established according to an approximate pattern of the
Norwegian Government Pension Fund Global, where the revenues
from oil and gas recovery will be channeled. The Petroleum
Fund was in 2018 was $ 15 803 million. The amount, which is
transferred annually to the state budget, will, according to
the regulations, be set to "Estimated Sustainable Income (ESI)",
which is set at three per cent of the petroleum fund. This
will enable the petroleum fund to secure East Timor's
economy in the longer term.
Primary industries contribute 9.1 percent of the
country's gross domestic product (GDP) and employ 41 percent
of the working population.
The most important agricultural products are coffee,
rice, corn, sweet potatoes, cassava, soybeans, mangoes,
bananas, cocoa, various spices, coconuts and cotton. Animal
husbandry, with cattle, sheep and water buffaloes, is a
significant industry. Good fishing banks are found off the
east and west coasts, but commercial fishing is limited.
The industry's contribution to the country's GDP is 56.7
and employs 13 per cent of the working population. The
coffee industry has traditionally been dominant, and in 2004
one of the world's largest raw coffee processing facilities
was opened in Estado. By the way, there are some smaller
textile factories and a small fishing industry.
The country had a production capacity of about 40 MW
until the armed conflict in 1999, when all hydroelectric
power stations were more or less destroyed. In some
districts, only about 10 per cent of households were
connected to the electricity supply. The restoration of the
power sector has been financed by international assistance,
including from Norway, but was not yet completed in 2016. In
2016, about 50 per cent was connected to the nationwide
electricity grid. In addition, around 7 per cent were
connected to a local grid, which is supported by a
micro-hydroelectric power station or photovoltaic plant.
The country's exports amounted to USD 16.7 million in
2017, while imports amounted to USD 681.2 million. With
this, East Timor had a large current account deficit abroad.
In addition to oil and gas, coffee and cattle are the main
export goods. Basic products such as rice, sugar and flour,
as well as petroleum, must be imported.
The five largest export markets were in 2017: Indonesia
(25.38 per cent), the United States (22.30 per cent),
Germany (13.65 per cent), China (8.49 per cent) and
Australia (5.94 per cent).
The five main import markets were 2017: Indonesia (31.68
percent), China (15.12 percent), Singapore (13.09 percent),
Hong Kong (10.11 percent) and Vietnam (6.61 percent).
Important goods are machinery, transport equipment,
chemicals, fuel and fertilizers.
Transport and Communications
The road network is poorly developed and generally of low
standard. The capital Dili has an international airport and
Development assistance to East Timor
East Timor receives bilateral development assistance from
a number of countries and multilateral assistance from,
among others, the UN, the EU and the Asian Exchange Bank.