Urban Industries and Urban Poverty in Timor-Leste

This study aims to improve MDF’s understanding of poverty in urban areas of Timor-Leste. There are two key research questions. Firstly, what opportunities exist for pro-poor business growth? Secondly, what are the characteristics of urban poverty? To answer these questions, a combination of primary research, literature reviews and key informant interviews were conducted and secondary data analysed.

Outside the tourism and agribusiness sectors (where MDF is already working) there are few opportunities for pro-poor business growth in urban areas of Timor-Leste.

The construction and services industry is growing and these companies can have a pro-poor impact, creating jobs and offering training. Supporting service businesses, however, offers limited opportunities for impact at scale. Where feasible, supporting local businesses to benefit from Timor-Leste’s construction boom would be beneficial. Supporting micro-enterprises in service sectors could have a more direct pro-poor impact.

Manufacturing is a small sector that creates few jobs. While the manufacturing sector is important for Timor-Leste’s long-term economic health, quick results should not be expected. Given that Timor-Leste is heavily dependent on imports, a good place to start is import substitution. Opportunities are limited by the competitiveness of imports and the small size of the Timor-Leste market but may include beverages, garments, furniture and cleaning products.

A potential avenue for export is ‘niche markets’, which fulfil a specialist demand and command high margins. There is also a small niche business in recycling.

The third-biggest source of foreign exchange in Timor-Leste is labour export. Remittances provide more foreign exchange than agriculture, tourism, or manufacturing. Schemes in South Korea, Australia and New Zealand employ a significant number of people, providing money and skills. These have a real pro-poor impact and there is potential to support them further.