Despite the lack of economic restructuring since 2002, there are early signs of change at all levels:
Timor-Leste’s Strategic Development Plan 2011-2030 is the first government strategy which makes inclusive private sector development a political priority in order to enable Timor-Leste’s transition to a middle-income country – including through the promotion of agribusiness, tourism and light manufacturing. The government has also begun to put actions behind words. Key initiatives include:
A new package of legislation governing private sector activity – including a more liberal Private Investment Law; new Export Law, Competition Law, Insolvency and Bankruptcy Law, Land Law, and Consumer Protection Law as well as a reformed Tax Law– all of which have either passed through parliament recently or are currently being developed. Business registration processes are also being simplified.
An emerging industrial policy – – including tax incentives and import duty exemptions to foreign and domestic investors, and plans to develop several special economic zones benefitting from targeted support. These zones may include new plantations, new food processing and light manufacturing industries, and new tourist destinations. These could create significant economic benefits and opportunities for poverty reduction, provided that appropriate protection mechanisms are put in place for local communities.
Infrastructure investments – including through small to medium public-private partnerships in rural and urban areas, and large-scale investments in public services, roads and ports. Major roads connecting Dili and secondary towns have recently been renewed or are being completed.
Talking to businesses in Timor-Leste, there is a clear sense of optimism and growing confidence in the economy: Local entrepreneurs who left the country during the Indonesian occupation are beginning to come back; some who have been active in Timor-Leste for several years are diversifying into new business lines; others who have been relying on government contracts are expanding their commercial activities. Major foreign investors are now venturing outside the oil and gas sector: Heineken is building the first beverage factory in Timor-Leste.30 Following Portugal Telecom, Indonesian and Vietnamese telecommunication providers entered the market in 2013.31 In addition, businesses from Singapore, China, Indonesia and Australia have recently invested in the tourism, export-import, logistics and consumer goods sectors.32 While manufacturing used to be viewed as unrealistic in Timor-Leste, several new production sites have been developed, and are successfully competing with imported goods.33 Leveraging this emerging business interest will be crucial for the country’s continued development.