A new economic driver for Timor-Leste

Bali is expected to have a total of more than 6.7 million foreign visitors in 2019. Such enormous numbers are achieved by reputation, word of mouth and travel media such as the US magazine Travel & Leisure, naming it one of the ten best islands in the world to visit.

The reasons for Bali’s success are diverse. This one small island offers visitors, bars and nightlife, unspoilt scenery, ecotourism, trekking, beaches, diving and snorkelling, sea life tours and a host of cultural attractions and luxury resorts in a perceived safe environment.

Bali is vital to Indonesia’s economic stability. For Indonesia, tourism provides a sustainable – and growing – income stream as oil and gas exports weaken. Since 2003, tourism has delivered a long-term average growth of rate of more than 3% per annum and is now worth more than US$10 billion annually. It is estimated that 20 per cent of the Bali population, which is nearly a million people, are employed in, or dependent upon, the tourism industry for income.

Only 1000 kilometres to the east of Bali, is Timor-Leste. 

Like Bali, it sits at the base of Southeast Asia, one of the most densely populated regions on earth. Timor-Leste has unspoilt mountains, crystal clear waters, pristine beaches, some of the best diving in the world on Atauro Island, and a 1.3-million population with an average age of 20 years old, completing school and seeking work.

Currently, the country’s dominant exports⁠ [1] are crude petroleum (c. 88%) and coffee (c. 6%),  and in the not too distant future, all being well, increased oil and gas revenue from the Timor Sea’s Greater Sunrise fields. 

Xanana Gusmao and the Timor-Leste Government delivered an enormous win to their country to secure the controlling share of Greater Sunrise, and it will provide a secure financial base for this emerging nation.

These extractive industry products are particularly useful because they offer a significant and fast boost to an economy – but they have a limited lifespan as fields inevitably run dry. The Timorese people should quite rightly see Greater Sunrise revenues as an opportunity to fast-track the building of roads, hospitals, schools and other essential services. But there should be a sense of urgency to move on developing this, fast. The global oil and gas corporate sectors are increasingly leading the move away from carbon-based energy sources to renewables. This was evidenced by Saudi Arabian Crown Prince Mohammad bin Salman’s decision in November 2019, to list their national oil company, Aramco⁠ [2], with less than expected uptake. As the world’s largest producer of crude oil, they have decided to diversify away from oil.

Speak to any economist, who does not have an agenda that influences them to ignore climate science data, and you will hear that oil and gas are not ideal commodities upon which to be predominantly reliant for a stable future economy.

On another front, the extractive resources industry is increasingly driven by automation, and research shows that employment in the sector is on the wane.⁠ [3] Education is costly, and in a nation with limited funds like Timor-Leste, I would like to see education investment directed across diverse vocational careers that provide longevity and flexibility. Once there is a more highly-trained workforce, this potentially leads to the growth of a new revenue stream, where trained Timorese will work overseas and send money home to their families, like the Philippines.

To help build a sustainable, diverse economy, one sector that is virtually invisible at the moment in Timor-Leste is tourism. This could be developed now and continue long after oil and gas have run their courses. Furthermore, it can employ men and women equally, and it capitalises on the country’s abundant natural resources – human and physical – without depleting them. 

Internationally, the tourism and hospitality sector employees 70% women and 30% men, making it an extremely positive sector for a developing and young nation like Timor-Leste. 

Research shows that if you wish to build a prosperous developing nation, employing women is the key. It was only in late 2018 that a study by the International Monetary Fund (IMF) concluded that bringing more women into a labour force brings more significant macroeconomic gains to the economy than if you were to add the same number of male workers. The IMF reported that up-skilling and educating women, and so lowering the gender gap, could increase a developing nation’s GDP by up to 35 per cent.⁠ [4] Eighty per cent of these gains come simply from new workers entering the labour force; the remaining 20 per cent stems from the results of gender diversity on productivity.

As the Government of Timor-Leste recognises in their Strategic Development Plan, 2011 to 2030, diversity of various types in their growing economy is essential to the country’s long-term stability. This plan is a wonderfully detailed and well-thought-out document that provides a blueprint for the Timorese people’s future. 

To support this plan, I believe the Timor-Leste Government could commit to the tourism sector’s development through public-private partnerships. Initial partnerships could be with airlines and international tourism operators, which I am sure would welcome the opportunity to be involved in such a promising new market.

From the Bali experience, we know that tourism delivers multiple benefits: foreign exchange, a market for local food products and services, increased community income, increased job opportunities leading to low unemployment, higher tax revenue, and a higher standard of living. It also preserves and grows local craft and cultural products.⁠ [5]  

If Timor-Leste could secure just 5 per cent of Bali’s foreign tourism, it could bring in 335,000 international visitors. With an average spend of US$1000⁠ [6] per person that would bring in US$335 million dollars per annum. That level of tourism, would create employment for many thousands of people, perhaps tens of thousands. In turn this helps bring increased job security, greater prospects and stability amongst the country’s currently unemployed youth.

I am reassured to see that I am not alone in my views. In the past two weeks there have been two reports identifying tourism as a priority sector for diversity and growth. The first is from the Australian Strategic Policy Institute (ASPI⁠) [7], the second⁠ [8] is from the World Bank, in which International Finance Corporation’s Country Manager for Indonesia, Malaysia and Timor-Leste, Azam Khan, succinctly summarises the situation: 

“The potential areas for boosting private sector participation include agribusiness and tourism, which will support economic diversification and help create needed jobs for people to realize their potential. In addition, the role of the private sector in improving access to finance will help small and medium sized enterprises, especially women-owned enterprises, expand.”

The Timorese people are quite rightly incredibly proud of their beautiful country and what they have achieved in such a short time since independence. A growing tourism sector would harness that enthusiasm and help promote Timor-Leste to the world and share its story, beautiful sights, sounds and culture.

References

1 International Trade Centre (Joint research unit between WTO and UN): http://www.intracen.org/country/timor-leste/sector-trade-performance/

2 Aljazeera: ‘Saudi Arabia values oil giant far below original target’. https://www.aljazeera.com/ajimpact/saudi-arabia-values-oil-giant-aramco-original-target-191117083511281.html

3 Jonathan Woetzel and Scott Nyquist, ‘The natural resources business is turning into a technology industry’, Harvard Business Review, June 2017. https://hbr.org/2017/06/how-the-natural-resources-business-is-turning-into-a-technology-industry

4 Emma Newburger, ‘Employing more women could boost economies by 35 percent, says IMF chief Christine Lagarde’, CNBC Make It, 5 Mar. 2019, https://www.cnbc.com/2019/03/05/imf-chief-employing-more-women-could-boost-economies-by-35-percent.html.

5 Made Antara and Made Sri Sumarniasih’, The Role of Tourism in the Economy of Bali and Indonesia. Journal of Tourism and Hospitality Management, December 2017, Vol. 5, No. 2, pp. 34-44.

6 This calculation is based on 335,000 visitors, each on a 5-night stay spending money on food, drinks, accommodation, entertainment, souvenirs and cultural items.

7 Rodgers & Hollis: ‘Timor-Leste and northern Australia: opportunities for mutual benefit’, ASPI, The Strategist, 22 November 2019. https://www.aspistrategist.org.au/timor-leste-and-northern-australia-opportunities-for-mutual-benefit/

8 ‘Timor-Leste: New World Bank Group Strategy Focuses on Private Sector Led Growth, Infrastructure and People’, Press Release, The World Bank, 29 November 2019. https://www.worldbank.org/en/news/press-release/2019/11/27/timor-leste-new-world-bank-group-strategy-focuses-on-private-sector-led-growth-infrastructure-and-people