Why this case study matters

Relevance for economic development stakeholders in Timor-Leste and similar contexts

Timor-Leste, a small island nation in Southeast Asia, has embarked on a remarkable recovery from its history of conflict and underdevelopment. When Timor-Leste officially gained independence in 2002, its economy had been left with minimal infrastructure; the education system was in disarray; and the agricultural production base was largely destroyed. Even data from 2010 suggest that close to 70% of the population may still be poor, easured in terms of education, health and living standards.2 And yet, Timor-Leste has now achieved a decade of stability and socio-economic progress. High population growth, if supported by sufficient skills training, provides favourable conditions for labour intensive industries and growing consumer demand. While recent development has been largely funded by petroleum dollars, pioneering local and international businesses are beginning to realise that the country has important productive investment opportunities.

This case study is about ways to leverage economic opportunities to achieve inclusive growth, despite the many challenges of conducting business in the country.  It profiles the work of the Market Development Facility (MDF), a flagship programme of the Australian government, which has focussed on kick-starting the development of promising economic activities, including in agribusiness, tourism and manufacturing. As one of the first programmes in Timor-Leste to use a market development approach, MDF works with and through local businesses and other partners to catalyse lasting improvements in the functioning of the economy. Its vision is to offer women and men pathways out of poverty through better access to services, employment and income opportunities.

As such, MDF is in a strategic position to contribute to the goals of both the Timorese and Australian Governments (see box). Having operated in Timor-Leste for five years, MDF now sees a need to share what it has learnt so far with relevant stakeholders. This case study offers a hands-on account of:

  • how MDF works and why;

  • What MDF has achieved to date in working with business and government partners -including in depth partnership profiles and short video interviews providing first-hand insights from partners and beneficiaries; and

  • Transferable lessons that can inform the future work of similar donor-funded or government programmes in Timor-Leste. These lessons are also highly relevant for other market development and inclusive growth programmes, including those operating in small economies emerging from conflict and highly dependent on primary resources. In particular, the case study teases out some of the key differences of working in such contexts and more advanced developing economies. The most important lessons for practitioners are featured in text boxes throughout the case study.


A key priority of Timor-Leste’s Agenda 2030 is the creation of a diversified economy in which the private sector is the major source of employment and income. The Australian aid strategy aaligns with this objective. Private sector development, with a particular focus on inclusive economic growth in the Indo-Pacific region, is a central development goal. All aid programmes are required to consider private sector solutions as a first resort to addressing development problems.

In addition to Timor-Leste, MDF currently operates in four other countries in the Indo-Pacific region: Pakistan, Sri Lanka and Papua New Guinea. The programme was launched in Timor-Leste in 2011.