Oil-rich East Timor to spend big on infrastructure
The tiny Southeast Asian nation of East Timor plans to upgrade its infrastructure with state investments of up to $1 billion in 2012, according to the country’s prime minister Xanana Gusmao. East Timor, which celebrated ten years of independence on May 20, 2012, needs to rebuild its economy after it was crippled by violence during its bid for full independence a decade ago.
The investment will come from the country’s oil fund, which is estimated to contain around $10 billion. The government will be upgrading about 3,000 kilometers of roads and plans to build two ports in the next five years. It will also have to rebuild schools and hospitals as well as the power grid and the irrigation system, much of which was destroyed during a rampage by Indonesian militia in 1999 after the former Portuguese colony voted in a referendum to end 24 years of Indonesian occupation.
The investment is part of a 20-year development plan initiated by Gusmao that aims to establish a more diversified economy and turn the nation into a middle income country. East Timor also aims to join ASEAN in 2013.
East Timor, having a population of only 1,1 million, is experiencing a strong growth of its economy projected to reach ten per cent in 2012, mainly underpinned by spending of oil and gas revenue. Over the last decade, the country has moved from the poorest nation in Asia, being entirely dependent on international aid, to a lower-middle income country with significant income from petroleum exploration.
However, analysts say the country needs to move away from oil and gas as its only source of income and diversify the economy by capitalising on fisheries, agriculture and tourism and not just petroleum. As workers are attracted by high wages in the oil sector, they are drawn away from agriculture and business, making the country reliant on imports of food and other goods. Formerly important export industries such as sandalwood and coffee are now lying idle. Furthermore, the current producing field Bayu-Undan off the country’s coast will most likely run dry by 2023. To exploit a larger gas field, Sunrise, which East Timor shares with Australia, the country is currently negotiating with Australia’s oil major Woodside Petroleum and aims to reach an agreement until 2013, including a solution to the question whether an LNG plant will be build in East Timor or not.
To encourage investors to engage in the nation, East Timor has set up an investment and export promotion agency, TradeInvest Timor-Leste. Its goal is to help potential investors locate opportunities in the country and assist foreign companies in projects. TradeInvest Timor-Leste acts as a one stop service provider for taxes, licensing, investment opportunities, permits, tariffs, or import and trade.
East Timor also plans to invest more money from its oil fund on the global financial markets. The Timor-Leste Petroleum Fund of $10 billion is about the size of Oman’s State General Reserve Fund, according to Sovereign Wealth Funds News. The fund, managed by US asset manager State Street Global Advisors, plans to beef up investment in global stocks in 2012 to as much as $2 billion.
With the continuing rise in government spending, East Timor’s economy is projected to stay strong, the Asian Development Bank (ADB) said. But the rate of economic growth is expected to ease, from ten per cent in 2012 to eight per cent in 2013, as the rate of fiscal expansion begins to moderate. Government expenditure is projected to expand by 25.7 per cent in 2012, but by only 10.3 per cent in 2013. Inflation is projected to average 10.2 per cent in 2012 before declining to 7.4 per cent in 2013, after 13.1 per cent in 2011, according to ADB figures.
[caption id="attachment_3222" align="alignleft" width="300" caption="East Timor's GDP is expected to grow at ten per cent in 2012, boosted by petroleum spending. However, the economy needs diversification away from oil and gas."][/caption] The tiny Southeast Asian nation of East Timor plans to upgrade its infrastructure with state investments of up to $1 billion in 2012, according to the country's prime minister Xanana Gusmao. East Timor, which celebrated ten years of independence on May 20, 2012, needs to rebuild its economy after it was crippled by violence during its bid for full independence a decade ago. The investment will come from the...
The tiny Southeast Asian nation of East Timor plans to upgrade its infrastructure with state investments of up to $1 billion in 2012, according to the country’s prime minister Xanana Gusmao. East Timor, which celebrated ten years of independence on May 20, 2012, needs to rebuild its economy after it was crippled by violence during its bid for full independence a decade ago.
The investment will come from the country’s oil fund, which is estimated to contain around $10 billion. The government will be upgrading about 3,000 kilometers of roads and plans to build two ports in the next five years. It will also have to rebuild schools and hospitals as well as the power grid and the irrigation system, much of which was destroyed during a rampage by Indonesian militia in 1999 after the former Portuguese colony voted in a referendum to end 24 years of Indonesian occupation.
The investment is part of a 20-year development plan initiated by Gusmao that aims to establish a more diversified economy and turn the nation into a middle income country. East Timor also aims to join ASEAN in 2013.
East Timor, having a population of only 1,1 million, is experiencing a strong growth of its economy projected to reach ten per cent in 2012, mainly underpinned by spending of oil and gas revenue. Over the last decade, the country has moved from the poorest nation in Asia, being entirely dependent on international aid, to a lower-middle income country with significant income from petroleum exploration.
However, analysts say the country needs to move away from oil and gas as its only source of income and diversify the economy by capitalising on fisheries, agriculture and tourism and not just petroleum. As workers are attracted by high wages in the oil sector, they are drawn away from agriculture and business, making the country reliant on imports of food and other goods. Formerly important export industries such as sandalwood and coffee are now lying idle. Furthermore, the current producing field Bayu-Undan off the country’s coast will most likely run dry by 2023. To exploit a larger gas field, Sunrise, which East Timor shares with Australia, the country is currently negotiating with Australia’s oil major Woodside Petroleum and aims to reach an agreement until 2013, including a solution to the question whether an LNG plant will be build in East Timor or not.
To encourage investors to engage in the nation, East Timor has set up an investment and export promotion agency, TradeInvest Timor-Leste. Its goal is to help potential investors locate opportunities in the country and assist foreign companies in projects. TradeInvest Timor-Leste acts as a one stop service provider for taxes, licensing, investment opportunities, permits, tariffs, or import and trade.
East Timor also plans to invest more money from its oil fund on the global financial markets. The Timor-Leste Petroleum Fund of $10 billion is about the size of Oman’s State General Reserve Fund, according to Sovereign Wealth Funds News. The fund, managed by US asset manager State Street Global Advisors, plans to beef up investment in global stocks in 2012 to as much as $2 billion.
With the continuing rise in government spending, East Timor’s economy is projected to stay strong, the Asian Development Bank (ADB) said. But the rate of economic growth is expected to ease, from ten per cent in 2012 to eight per cent in 2013, as the rate of fiscal expansion begins to moderate. Government expenditure is projected to expand by 25.7 per cent in 2012, but by only 10.3 per cent in 2013. Inflation is projected to average 10.2 per cent in 2012 before declining to 7.4 per cent in 2013, after 13.1 per cent in 2011, according to ADB figures.
