Timor-Leste

Timor-Leste country brief

Introduction

The Democratic Republic of Timor-Leste (East Timor) and Australia have a close relationship, based on proximity, history and people-to-people links.

Australia has been at the forefront of international support for Timor-Leste during its first 10 years of independence, not only as the largest bilateral donor of development assistance, but also by providing a leadership role to ensure security and stability in the country.

Timor-Leste's population of around 1.1 million is among the fastest growing in the world, with an estimated average growth rate of 3.2 per cent between 2005 and 2010.

The official languages of Timor-Leste are Tetum and Portuguese, while English and Indonesian are working languages. Approximately 95 per cent of Timorese are Catholic.

Political overview

Timor-Leste achieved formal independence on 20 May 2002. Timor-Leste's independence resulted from the August 1999 UN-sponsored referendum.

The first democratic legislative elections were held on 30 August 2001 and over 91 per cent of Timor-Leste's eligible voters elected a Constituent Assembly.

In March 2002, the Constituent Assembly approved Timor-Leste's Constitution (based on the Portuguese model) with an elected President as head of state and a Prime Minister appointed from the political party, or alliance of political parties, with a majority in the unicameral parliament.

Timor-Leste held Parliamentary elections on 7 July 2012. Prime Minister Xanana Gusmao’s National Congress for the Reconstruction of Timor (CNRT) party received the highest percentage share of the votes (36.68 per cent), followed by Fretilin (29.89 per cent), the Democratic Party – PD (10.30 per cent) and Frenti Mudansa (3.11 per cent). Voter participation was 74.78 per cent and 97.64 per cent of votes were valid.

Former Chief of the Armed Forces, Taur Matan Ruak replaced Dr Jose Ramos-Horta as President on 20 May 2012 following elections in March and April.

Legislative elections Presidential elections
Last held 7 July 2012 17 March 2012 (run-off following first round on 16 April 2012)
Key results National Congress for the Reconstruction of Timor (CNRT) (36.7%) Mr Taur Matan Ruak (61.23%)
Fretilin (29.9%) Francisco ‘Lu’Olo’ Guterres (38.77%)
Democratic Party (PD) (10.3%)
Frenti Mudansa (3.1%)
Term duration Five years Five years
Next elections Due by mid-2017 Due by mid-2017

Economic overview

Timor-Leste is one of the poorest countries in the Asia-Pacific region and its economy is one of the most heavily petroleum-dependent in the world.

The Timorese Government is seeking to use its oil revenues in support of long-term economic development, economic diversification and poverty reduction. On 13 July 2011 the Timorese Government released a Strategic Development Plan, which provides a framework for development for 2011-2030.

Timor-Leste faces a range of long-term development challenges to achieve sustainable and broad-based economic growth. These challenges are compounded by infrastructure deficits, notably in the areas of transportation, telecommunication and electricity.

Timor-Leste has established an internationally-acclaimed Petroleum Fund to manage its petroleum revenues transparently and sustainably. As at 31 May 2012, the fund was valued at US$10.35 billion.

The Timorese economy is growing, with budget papers reporting growth of 8.5 per cent in 2010 and projected 10 per cent growth in 2011. The Timorese Government has targeted growth of 10.9 per cent for 2012, which is above IMF projections of 8.6 per cent.

Despite this economic growth, Timor-Leste remains a challenging business environment with the International Finance Corporation ranking it 168 (out of 183) in the 2012 Ease of Doing Business Survey.

Timor-Leste's 2012 budget continues a trend of increasing public spending. With expenditure of US$1.67 billion this will be Timor-Leste's largest budget to date.

Bilateral relationship

The Australian people have a special affinity with Timor-Leste stretching back decades.

Australia was in the front-line of support for Timor-Leste's transition to independence and led the multinational INTERFET force which restored security in Timor-Leste following the 1999 post-independence ballot violence.

Australia currently leads the International Stabilisation Force (ISF), comprised of Australian and New Zealand Defence Force members. The ISF provides security back-up to the UN Integrated Mission in Timor-Leste (UNMIT) and remains in Timor-Leste at the invitation of the Timorese Government.

Reflective of the strength of the bilateral relationship, there have been numerous high-level visits between Australia and Timor-Leste:

Development assistance

Although Timor-Leste is one of the poorest countries in the Asia-Pacific region, it has made considerable progress since independence but it will require substantial assistance from the international community, including Australia, for some time to come.

As a close neighbour, Australia is strongly committed to Timor-Leste's development priorities and provides support to assist the Government of Timor-Leste to achieve stability and greater prosperity.

Australia is Timor-Leste's largest bilateral donor. From 1999 to June 2011, Australia gave Timor-Leste $1.04 billion in emergency and development aid.

Through development assistance over the years Australia has supported:

Australia currently assists in:

More information on Australia's development assistance to Timor-Leste

Australia also supports Timor-Leste's maintenance of security and stability through developing the capacity of its security institutions – the police (PNTL) and army (F-FDTL). Current programs of support are provided through the Timor-Leste Police Development Program (TLPDP) and the Defence Cooperation Program (DCP).

Bilateral economic and trade relationship

In 2010-11, Timor-Leste ranked as Australia's 103rd largest goods trading partner, with total merchandise trade valued at $31 million.

Australian exports to Timor-Leste were valued at $30 million with major items including passenger motor vehicles, refined petroleum, electrical machinery and parts, and beef.

Imports were valued at $1 million, mostly coffee. Timor-Leste has had preferential duty free access and quota free access to the Australian market since July 2003.

Timor-Leste has a steadily improving overall global trade balance, reflecting the contribution of petroleum development. Excluding hydrocarbons, coffee accounts for around 90 per cent of merchandise exports.

Agriculture

Agriculture plays an important part in the Timorese non-oil economy, accounting for over 30 per cent of GDP and around 75 per cent of employment.

Relatively low food production by small-holders as well as underdeveloped local markets has led to a dependency on imports. Transforming subsistence farming into an export-oriented industry is a challenge. Key crops such as coffee and vanilla, and potentially candlenut and palm oil, are being targeted for increased capital investment.

Finance and banking

The US dollar was adopted as the official currency in January 2000. Timorese coins in denominations of 1, 5, 10, 25 and 50 centavos were introduced in November 2003 to enable small denomination transactions and partially assist with monetisation of the economy.

Legal and judicial issues

Timor-Leste's legal system is based on civil as opposed to common law.

Although a broad range of legislation has been promulgated, further strengthening of legal and judicial frameworks will be key to promoting economic development and effective governance in Timor-Leste.

Important commercial legislation that has already been passed by Parliament includes company law, commercial registry and tax legislation providing further incentives to investors.

Further legislation is intended to simplify the business registration process. The introduction of land ownership, foreign investment, bankruptcy, banking and insurance laws is a priority.

The Government of Timor-Leste is also developing additional private sector enabling legislation, designed to establish an open, attractive and competitive environment for investment. Central to this aim has been the establishment of an Investment and Export Promotion Agency.

The Timorese Constitution does not recognise foreign land ownership.

Australia Timor-Leste Country Strategy

The Australia Timor-Leste Country Strategy 2009 to 2014 sets out how Australian development assistance, primarily delivered by DFAT and the Australian Federal Police, will assist the government and people of Timor-Leste to work towards the Millennium Development Goals.

Developed in partnership with Timor-Leste's government, the Strategy has a particular focus on achieving results in the priority areas of health, education, employment, government accountability and police capacity. These priority areas strongly align with Timor-Leste's national priorities. There is also a focus on poverty reduction through strengthening security and building state legitimacy.

Key Australian and Timorese stakeholders, including state and local governments and non-government organisations, and the multilateral development banks, were consulted throughout the process of developing the strategy.

Travel

Australians planning on visiting Timor-Leste should consult the travel advice for Timor-Leste before departure.

Updated July 2012