Economy of East Timor
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The economy of East Timor is a low-income economy as ranked by the
World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...
. It is placed 133rd on the
Human Development Index The Human Development Index (HDI) is a statistic composite index of life expectancy, education (mean years of schooling completed and expected years of schooling upon entering the education system), and per capita income indicators, whi ...
, indicating a medium level of human development. 20% of the population is
unemployed Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid employment or self-employment but currently available for work during the referen ...
,East Timor
''
The World Factbook ''The World Factbook'', also known as the ''CIA World Factbook'', is a reference resource produced by the Central Intelligence Agency (CIA) with almanac-style information about the countries of the world. The official print version is available ...
''.
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.
and 52.9% live on less than $1.25 a day. About half of the population is
illiterate Literacy in its broadest sense describes "particular ways of thinking about and doing reading and writing" with the purpose of understanding or expressing thoughts or ideas in written form in some specific context of use. In other words, hum ...
. At 27%,
East Timor East Timor (), also known as Timor-Leste (), officially the Democratic Republic of Timor-Leste, is an island country in Southeast Asia. It comprises the eastern half of the island of Timor, the exclave of Oecusse on the island's north-weste ...
's urbanisation rate is one of the lowest in the world. In 2007, a bad harvest caused a "major food crisis" in East Timor. By November, eleven sub-districts still needed food supplied by international aid. According to data gathered in the 2010 census, 87.7% of urban and 18.9% of rural households have electricity, for an overall average of 36.7%.


History

Prior to and during colonisation, the island of Timor was best known for its
sandalwood Sandalwood is a class of woods from trees in the genus ''Santalum''. The woods are heavy, yellow, and fine-grained, and, unlike many other aromatic woods, they retain their fragrance for decades. Sandalwood oil is extracted from the woods for us ...
. The Portuguese colonial administration also granted concessions to Oceanic Exploration Corporation to develop oil and gas deposits. However, this was curtailed by the Indonesian invasion in 1976. Petrochemical resources were divided between Indonesia and Australia with the
Timor Gap Treaty The Timor Gap Treaty was formally known as the ''Treaty between Australia and the Republic of Indonesia on the zone of cooperation in an area between the Indonesian province of East Timor and Northern Australia''. It was a bilateral treaty betwee ...
in 1989. The treaty established guidelines for joint exploitation of seabed resources in the area of the "gap" left by then-Portuguese Timor in the
maritime boundary A maritime boundary is a conceptual division of the Earth's water surface areas using physiographic or geopolitical criteria. As such, it usually bounds areas of exclusive national rights over mineral and biological resources,VLIZ Maritime Bound ...
agreed between the two countries in 1972. Revenues from the "joint" area were to be divided 50-50.
Woodside Petroleum Woodside Energy Group Ltd (formerly Woodside Petroleum Ltd) is an Australian petroleum exploration and production company. Woodside is the operator of oil and gas production in Australia and also Australia's largest independent dedicated oil an ...
and
ConocoPhillips ConocoPhillips Company is an American multinational corporation engaged in hydrocarbon exploration and production. It is based in the Energy Corridor district of Houston, Texas. The company has operations in 15 countries and has production in ...
began development of some resources in the Timor Gap on behalf of the two governments in 1992. In late 1999, about 70% of the economic infrastructure of East Timor was destroyed by Indonesian troops and anti-independence militias, and 260,000 people fled westward. From 2002 to 2005, an international program led by the
United Nations The United Nations (UN) is an intergovernmental organization whose stated purposes are to maintain international peace and international security, security, develop friendly relations among nations, achieve international cooperation, and be ...
, manned by civilian advisers, 5,000 peacekeepers (8,000 at peak) and 1,300 police officers, substantially reconstructed the infrastructure. By mid-2002, all but about 50,000 of the refugees had returned. The economy grew by about 10% in 2011 and at a similar rate in 2012. While East Timor gained revenue from offshore oil and gas reserves, little of it has been spent on the development of villages, which still rely on subsistence farming. , nearly half the East Timorese population was living in extreme poverty.


Data


Industries

In the Doing Business 2013 report by the World Bank, East Timor was ranked 169th overall and last in the East Asia and Pacific region. The country fared particularly poorly in the "registering property", "enforcing contracts", and "resolving insolvency" categories, ranking last worldwide in all three. In 2020 it ranked 181st. There are no
patent laws A patent is a type of intellectual property that gives its owner the legal right to exclude others from making, using, or selling an invention for a limited period of time in exchange for publishing an enabling disclosure of the invention."A p ...
in East Timor. Regarding telecommunications infrastructure, East Timor is the second to last ranked Asian country in the World Economic Forum's Network Readiness Index (NRI), with only
Myanmar Myanmar, ; UK pronunciations: US pronunciations incl. . Note: Wikipedia's IPA conventions require indicating /r/ even in British English although only some British English speakers pronounce r at the end of syllables. As John C. Wells, Joh ...
falling behind it in Southeast Asia. In the 2014 NRI ranking, East Timor ranked number 141 overall, down from 134 in 2013. East Timor is part of the
Timor Leste–Indonesia–Australia Growth Triangle The Timor-Leste–Indonesia–Australia Growth Triangle (''TIA-GT'') is a combined initiative of the regions of Eastern Indonesia, Northern Australia, and the Democratic Republic of Timor-Leste. This initiative aims to promote and foster economic ...
(TIA-GT).


Agriculture

The agriculture sector employs 80% of East Timor's active population. In 2009, about 67,000 households grew coffee in East Timor, with a large proportion of those households being poor. Currently, the
gross margin Gross margin is the difference between revenue and cost of goods sold (COGS), divided by revenue. Gross margin is expressed as a percentage. Generally, it is calculated as the selling price of an item, less the cost of goods sold (e. g. production ...
s are about $120 per hectare, with returns per labour-day of about $3.70. There were 11,000 households growing mungbeans as of 2009, most of them by subsistence farming. 94% of domestic fish catch comes from the ocean, especially coastal fisheries. 66% of families are in part supported by these subsistence activities, however the country as a whole does not produce enough food to be self-sustaining, and thus relies on imports.
Coffee Coffee is a drink prepared from roasted coffee beans. Darkly colored, bitter, and slightly acidic, coffee has a stimulant, stimulating effect on humans, primarily due to its caffeine content. It is the most popular hot drink in the world. S ...
,
rice Rice is the seed of the grass species ''Oryza sativa'' (Asian rice) or less commonly ''Oryza glaberrima ''Oryza glaberrima'', commonly known as African rice, is one of the two domesticated rice species. It was first domesticated and grown i ...
,
maize Maize ( ; ''Zea mays'' subsp. ''mays'', from es, maíz after tnq, mahiz), also known as corn (North American and Australian English), is a cereal grain first domesticated by indigenous peoples in southern Mexico about 10,000 years ago. Th ...
,
coconut The coconut tree (''Cocos nucifera'') is a member of the palm tree family ( Arecaceae) and the only living species of the genus ''Cocos''. The term "coconut" (or the archaic "cocoanut") can refer to the whole coconut palm, the seed, or the ...
s,
cassava ''Manihot esculenta'', common name, commonly called cassava (), manioc, or yuca (among numerous regional names), is a woody shrub of the spurge family, Euphorbiaceae, native to South America. Although a perennial plant, cassava is extensively ...
,
soybean The soybean, soy bean, or soya bean (''Glycine max'') is a species of legume native to East Asia, widely grown for its edible bean, which has numerous uses. Traditional unfermented food uses of soybeans include soy milk, from which tofu an ...
s,
banana A banana is an elongated, edible fruit – botanically a berry – produced by several kinds of large herbaceous flowering plants in the genus ''Musa''. In some countries, bananas used for cooking may be called "plantains", distinguis ...
s,
mango A mango is an edible stone fruit produced by the tropical tree ''Mangifera indica''. It is believed to have originated in the region between northwestern Myanmar, Bangladesh, and northeastern India. ''M. indica'' has been cultivated in South a ...
, and
sweet potato The sweet potato or sweetpotato (''Ipomoea batatas'') is a dicotyledonous plant that belongs to the Convolvulus, bindweed or morning glory family (biology), family, Convolvulaceae. Its large, starchy, sweet-tasting tuberous roots are used as a r ...
es are cultivated here. After
petroleum Petroleum, also known as crude oil, or simply oil, is a naturally occurring yellowish-black liquid mixture of mainly hydrocarbons, and is found in geological formations. The name ''petroleum'' covers both naturally occurring unprocessed crud ...
, the second largest export is
coffee Coffee is a drink prepared from roasted coffee beans. Darkly colored, bitter, and slightly acidic, coffee has a stimulant, stimulating effect on humans, primarily due to its caffeine content. It is the most popular hot drink in the world. S ...
, which generates about $10 million a year. 9,000 tonnes of coffee, 108 tonnes of
cinnamon Cinnamon is a spice obtained from the inner bark of several tree species from the genus ''Cinnamomum''. Cinnamon is used mainly as an aromatic condiment and flavouring additive in a wide variety of cuisines, sweet and savoury dishes, breakfa ...
, and 161 tonnes of cocoa were harvested in 2012 making the country the 40th ranked producer of coffee, the 6th ranked producer of cinnamon and the 50th ranked producer of cocoa worldwide.


Energy


Oil and gas

The Portuguese colonial administration granted concessions to the Australia-bound Oceanic Exploration Corporation to develop petroleum and natural gas deposits in the waters southeast of Timor. However, this was curtailed by the Indonesian invasion in 1976. The resources were divided between Indonesia and Australia with the
Timor Gap Treaty The Timor Gap Treaty was formally known as the ''Treaty between Australia and the Republic of Indonesia on the zone of cooperation in an area between the Indonesian province of East Timor and Northern Australia''. It was a bilateral treaty betwee ...
in 1989. East Timor inherited no permanent maritime boundaries when it attained independence. A provisional agreement (the
Timor Sea Treaty Formally known as the Timor Sea Treaty between the Government of East Timor and the Government of Australia was signed between Australia and East Timor in Dili, East Timor on 20 May 2002, the day East Timor attained its independence from United ...
, signed when East Timor became independent on 20 May 2002) defined a Joint Petroleum Development Area (JPDA) and awarded 90% of revenues from existing projects in that area to East Timor and 10% to Australia. An agreement in 2005 between the governments of East Timor and Australia mandated that both countries put aside their dispute over maritime boundaries and that East Timor would receive 50% of the revenues from the resource exploitation in the area (estimated at A$26 billion, or about US$20 billion over the lifetime of the project) from the Greater Sunrise development. In 2013, East Timor launched a case at the
Permanent Court of Arbitration The Permanent Court of Arbitration (PCA) is a non-UN intergovernmental organization located in The Hague, Netherlands. Unlike a judicial court in the traditional sense, the PCA provides services of arbitral tribunal to resolve disputes that arise ...
in The Hague to pull out of a gas treaty that it had signed with Australia, accusing the
Australian Secret Intelligence Service Australian(s) may refer to: Australia * Australia, a country * Australians, citizens of the Commonwealth of Australia ** European Australians ** Anglo-Celtic Australians, Australians descended principally from British colonists ** Aboriginal Aus ...
(ASIS) of
bugging A covert listening device, more commonly known as a bug or a wire, is usually a combination of a miniature radio transmitter with a microphone. The use of bugs, called bugging, or wiretapping is a common technique in surveillance, espionage and ...
the East Timorese cabinet room in Dili in 2004. At the time of independence East Timor had per capita natural wealth equivalent to the wealth of an upper-middle income country. Over half of this was in oil, and over a quarter natural gas. The
Timor-Leste Petroleum Fund The Timor-Leste Petroleum Fund ( pt, Fundo petrolífero de Timor-Leste) is a sovereign wealth fund into which the surplus wealth produced by East Timor petroleum and gas income is deposited by the East Timorese government. The fund was establishe ...
was established in 2005 to turn these non-renewable resources into a more sustainable form of wealth. By 2009 it had a value of US$4.8 billion, and by 2011 it had reached a worth of US$8.7 billion. East Timor is labelled by the International Monetary Fund as the "most oil-dependent economy in the world". The Petroleum Fund pays for nearly all of the government's annual budget, which increased from $70 million in 2004 to $1.3 billion in 2011, with a $1.8 billion proposal for 2012. East-Timor's income from oil and gas stands to increase significantly after its cancellation of a controversial agreement with Australia, which gave Australia half of the income from oil and gas from 2006. From 2005 to 2021, $23 billion earned from oil sales has entered the fund. $8 billion has been generated from investments, while $12 billion has been spent. A decrease in oil and gas reserves led to decreasing HDI beginning in 2010. 80% of government spending comes from this fund, which as of 2021 had $19 billion, 10 times greater than the size of the national budget. As oil income has decreased, the fund is at risk of being exhausted. Withdrawals have exceeded sustainable levels almost every year since 2009.


Electricity

Electricidade De Timor-Leste (EDTL) is the vertically integrated monopoly generator and distributor of electric power within the on-grid areas.


Tourism

In 2017, the country was visited by 75,000 tourists. Since the later 2010s, tourism has been increasing and the number of hotels and resorts has increased. The government decided to invest in the expansion of the international airport in Dili.


Transport


Development projects


Electricity

*
Betano Power Station The Betano Power Station (Portuguese Central Eléctrica de Betano) is an oil power station located northeast of Betano, in the Manufahi District of East Timor. It was built to supply the South coast of East Timor with electricity, while the Nort ...


Oil and gas

One promising long-term project is the joint development with Australia of
petroleum Petroleum, also known as crude oil, or simply oil, is a naturally occurring yellowish-black liquid mixture of mainly hydrocarbons, and is found in geological formations. The name ''petroleum'' covers both naturally occurring unprocessed crud ...
and
natural gas Natural gas (also called fossil gas or simply gas) is a naturally occurring mixture of gaseous hydrocarbons consisting primarily of methane in addition to various smaller amounts of other higher alkanes. Low levels of trace gases like carbo ...
resources in the waters southeast of East Timor. East Timor inherited no permanent maritime boundaries when it gained independence, repudiating the Timor Gap Treaty as illegal. A provisional agreement (the
Timor Sea Treaty Formally known as the Timor Sea Treaty between the Government of East Timor and the Government of Australia was signed between Australia and East Timor in Dili, East Timor on 20 May 2002, the day East Timor attained its independence from United ...
, signed when East Timor became independent in 2002) defined a Joint Petroleum Development Area (JPDA), and awarded 90% of revenues from existing projects in that area to East Timor and 10% to Australia. The first significant new development in the JPDA since East Timorese independence is the largest petroleum resource in the Timor Sea, the Greater Sunrise gas field. Its exploitation was the subject of separate agreements in 2003 and 2005. Only 20% of the field lies within the JPDA and the rest in waters not subject to the treaty (though claimed by both countries). The initial, temporary agreement gave 82% of revenues to Australia and only 18% to East Timor. The government of East Timor has sought to negotiate a definite boundary with Australia at the halfway line between the countries, in accordance with the
United Nations Convention on the Law of the Sea The United Nations Convention on the Law of the Sea (UNCLOS), also called the Law of the Sea Convention or the Law of the Sea Treaty, is an international agreement that establishes a legal framework for all marine and maritime activities. , 167 c ...
. The government of Australia preferred to establish the boundary at the end of the wide Australian
continental shelf A continental shelf is a portion of a continent that is submerged under an area of relatively shallow water, known as a shelf sea. Much of these shelves were exposed by drops in sea level during glacial periods. The shelf surrounding an island ...
, as agreed with Indonesia in 1972 and 1991. Normally a dispute such as this would be referred to the
International Court of Justice The International Court of Justice (ICJ; french: Cour internationale de justice, links=no; ), sometimes known as the World Court, is one of the six principal organs of the United Nations (UN). It settles disputes between states in accordanc ...
or the
International Tribunal for the Law of the Sea International is an adjective (also used as a noun) meaning "between nations". International may also refer to: Music Albums * ''International'' (Kevin Michael album), 2011 * ''International'' (New Order album), 2002 * ''International'' (The T ...
for an impartial decision, but the Australian government had withdrawn from these international jurisdictions (solely on matters relating to maritime boundaries) shortly before East Timorese independence. Nevertheless, under public and diplomatic pressure, the Australian government offered instead a last-minute concession solely on royalties from the Greater Sunrise gas field. An agreement was signed in 2005 under which both countries would set aside the dispute over the maritime boundary, and East Timor would receive 50% of the revenues (estimated at A$26 billion or about
US$ The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
20 billion over the lifetime of the project) from the Greater Sunrise development. Other developments within waters claimed by East Timor but outside the JPDA (Laminaria-Corallina and Buffalo) continue to be exploited unilaterally by Australia, however. Some proceeds from East Timor's petroleum royalties are directed to the country's
sovereign wealth fund A sovereign wealth fund (SWF), sovereign investment fund, or social wealth fund is a state-owned investment fund that invests in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such ...
, the
Timor-Leste Petroleum Fund The Timor-Leste Petroleum Fund ( pt, Fundo petrolífero de Timor-Leste) is a sovereign wealth fund into which the surplus wealth produced by East Timor petroleum and gas income is deposited by the East Timorese government. The fund was establishe ...
.


Telecoms


References


Further reading


Mats Lundahl and Fredrik Sjöholm. 2019. ''The Creation of the East Timorese Economy''. Springer.
* * {{DEFAULTSORT:Economy Of East Timor