Why do Business in Timor-Leste?
Ambassador to Timor-Leste, Peter Doyle
Address to the Northern Territory International Business Council
Darwin, Friday 16 October 2015
I’m going to try to cover quickly three things this afternoon and then I’ll be happy to take questions: I will give an overview of Timor-Leste’s political and economic context, discuss the main issues in the business environment, and outline the main business opportunities, including ways to partner with the Australian Government.
Timor-Leste is a young nation that has notched up some impressive achievements since independence in 2002. Conflict is now a thing of the past. Timor-Leste has held successful elections twice since independence and the country is stable.
In February this year, and for the first time, Timor-Leste underwent a change of government that was not done as a response to a crisis. The smoothness of this transition was a testament to Timor-Leste’s political stability and ability of the political class to work together.
One of the most interesting results of this transition was the creation of new ‘coordinating minister’ roles, including a Coordinating Minister of Economic Affairs. The idea is to bring more coherence to the government’s reform agenda.
Despite these advances, Timor-Leste’s economic challenges remain profound. Foremost among them is its fiscal sustainability. The country is highly dependent on oil revenue for its budget and most of its economic activity.
But oil production and revenues have peaked and prices are low. The Bayu Undan field, which is now the only field providing revenue to Timor-Leste, is likely to cease production early in the next decade.
The Timor-Leste government is starting to grapple with these questions. The country’s Strategic Development Plan commits the country to diversifying its economy into agriculture and tourism. There is also a Fiscal Reform Commission that is examining ways to raise more revenue.
But the reality is that unless there is a significant expansion of private sector activity and foreign investment, the risk that Timor-Leste will face greater fiscal challenges. Government spending will come under pressure and the private sector will need to pick up the slack.
So what are the opportunities? In broad terms, there is the advantage of being the first or early mover in a market between Australia and south-east Asia. There is a good chance you will be doing something for the first time, or be doing it better than anyone else, and you can establish yourself as the ‘go-to’ supplier, consultant, or trainer.
But Timor-Leste can still be a challenging place to do business. It is not the sort of place where you can turn a profit quickly. Laws and regulations can often be incomplete, non-existent or not fit for purpose and the bureaucracy often doesn’t know the answer.
It can also be difficult to enforce contracts, resolve legal disputes, access land and obtain bankruptcy protection. The relatively low education and health levels of the workforce also have to be factored in.
But it’s not all bad news. With Australia’s help, it is now much easier to register a business in Timor-Leste. Access to electricity is also better. And there is a small business services sector that Australian companies can access.
The number of potential entry points into Timor-Leste is growing, with several major planned investments, including a new sea port west of Dili, a petroleum industry on the south coast, a cement clinker plant, a Special Economic Zone in the Oecusse Municipality and fibre optic cables.
Through the World Bank, Australia is supporting several of these investments. The Asian Development Bank also has a list of projects it is financing and it is encouraging Australian firms to bid for them.
Construction and engineering, vocational education and training, as well as the nascent business services, tourism, agribusiness and manufacturing sectors may also present opportunities, particularly to Territory businesses.
Territorians are prominent in Timor-Leste’s private sector. Territory businesses are present across the board including in tourism, education and training, business services and retail. The Territory’s proximity to Timor-Leste gives it a unique advantage: logistics, contacts and using local knowledge are all easier from here.
The NT Chamber has also led several business delegations to Timor-Leste, the latest in May this year. I congratulate the Chamber on this work and encourage it to arrange future delegations. I understand you may look to arrange another visit around a future investment conference. As always, we look forward to assisting you next time you visit.
The Australian Government wants to involve the private sector more in its activities and programs overseas. There are several new avenues for businesses and the Australian Government to cooperate.
The Minister for Foreign Affairs recently announced a new Business Partnerships Platform for Australian businesses. This is in addition to the opportunities in the development assistance program and the New Colombo Plan.
There are currently two development programs in Timor-Leste that may offer opportunities for Australian businesses: the ‘Farming for Prosperity’ program, known as Tomak, and our Human Development Program.
The Seasonal Workers Program is a well-established program that Territory business can take advantage of. The program is now uncapped, so as long as you meet the criteria you can employ as many workers as you need.
With Timor-Leste and Indonesia, we are exploring ways to promote business activity on a trilateral basis in the sub-region. And there will be a trilateral investment conference in Dili on 5 November.
My staff and I at the Australian Embassy in Dili stand ready to assist and advise you and I’d encourage you to contact us, particularly our business liaison officer, Ed Cohen, at an early stage in your plans.
I’m happy to expand on any of these points in the q and a and follow up as needed. My colleague Lorenzo Strano will also distribute hard and soft copies of my remarks and in the soft copy we’ve included hyperlinks to the Australian Government programs initiatives I mentioned as well as our other Economic Diplomacy, business engagement and private sector development resources.
Ultimately, doing business in Timor-Leste depends on your risk appetite. If you haven’t already, I’d suggest coming over to test your perception against the reality. There may be strong rewards if you feel you can have a go.