The future of business in Timor-Leste

To say that Timor-Leste has had its fair share of challenges over the past four years would be an understatement of seismic proportions. On top of pandemic-related crises, Timor has suffered catastrophic climate events, political unrest, and its home-grown economic crisis with the impending collapse of the fossil fuel sector that the young republic had banked on lasting generations.

You needn’t look far for reports of economic doom and gloom. The IMF estimated that non-oil GDP declined by 7.6 percent in 2020, the most significant contraction since Timor-Leste won independence in 2002. Meanwhile, the Asia Foundation estimated in a May 2021 survey that 94 percent of small-medium enterprises were now facing an existential crisis.

Equitable development and reform in the private sector are key to reversing this looming economic crisis and improving the lives of Timorese, a third of whom still suffer chronic food insecurity along with inadequate housing, healthcare, education, and employment opportunities. Standing still is simply not an option; looking at the most optimistic projections, Timor-Leste’s sovereign wealth fund (AUD 24 billion) will run out in fifteen years if nothing changes.

I’m not here to perpetuate the cycle of doom and gloom projections—there is more than enough commentary out there on that. Rather, as detailed in my recent article, I have the unique perspective of two decades worth of on-the-ground experience and first-hand insight into Timor’s private-sector space to be able to make recommendations for the road to recovery and prosperity. My experiences in Timor speak louder than dire economic predictions—I still firmly believe that given the right government support, untapped opportunities abound for local and foreign enterprises. Optimism combined with pragmatism is, after all, at the heart of the entrepreneurial spirit.

The government of Timor-Leste must take a more active role in fostering an equitable and sustainable business community to support future economic growth. In the past, I have advocated for establishing a reward-based employment incentive scheme that encourages greater direct investment into local employment via tax concessions. Not only will this boost local employment opportunities, but it will provide much-needed diversification across a range of sectors (as opposed to over-relying on tax revenues from the fossil fuel industry). Other areas of fiscal reform include establishing attractive trade agreements with other countries to avoid the disincentive of double taxation.

Being on the ground (as opposed to remote operations) has made it much easier to navigate bureaucratic hurdles when it comes to supply chain issues; however, for foreign investment to be further encouraged, these administrative systems require an urgent overhaul, removing unnecessary red tape and becoming more streamlined and reliable.

As it stands, Timor-Leste’s current system of land tenure laws is the most significant barrier to both multinationals entering the Timorese market and aspiring local investors. Progressive land ownership reform is a prerequisite to the growth and expansion of the non-oil private sector. Land reform will have a positive spillover effect on liquidity, interest rates, and more diverse economic activity.

After sacrificing so much for independence, the Timorese people deserve the type of stability and economic prosperity taken for granted in places like Australia—their democratic leaders owe them that. There simply is no other choice but to succeed.