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East Timor Economical Facts

 

Economical overview

East Timor is a country with a lot of money but with many poor residents. At the same time as oil and natural gas extraction provides good income to the state, about one in three people live in poverty. An important source of income besides oil and gas is coffee exports.

East Timor's economy was ravaged during the violence in 1999, when GDP shrank by 39 percent and nearly 80 percent of all infrastructure was destroyed. With the help of international bodies such as the UN, the World Bank and the Asian Development Bank, as well as assistance from many individual states and organizations, a new economy has been built up with agriculture and oil and natural gas extraction as a base.

  • Countryaah.com: Major imports by East Timor, covering a full list of top products imported by the country and trade value for each product category.

Significant oil and natural gas deposits are found in Lake Timor off the south coast. An agreement with Australia on the distribution of oil and gas revenues from Lake Timor provides East Timor with 90 percent of revenues from the fields located in a sea zone closest to the East Timorese coast. In 2019, the countries agreed that most of the income from fields further out into the sea should also go to East Timor.

In 2007, oil production in the internal fields started in earnest. Nowadays, a large part of the revenue in the state budget comes from oil and gas extraction.

  • Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including RTL which represents the country of East Timor.

Economical Facts of East Timor

Assistance decreases

But despite oil revenues, East Timor is still a typical agricultural country in many ways. Between 70 and 80 percent of the residents live on growing crops for their own use and lack of paid work. The commercially most important crop is coffee that goes on export (see Agriculture and Fisheries).

Some East Timorians derive their income from crafts and light industry, primarily food processing and textile industry (see Industry). Investments are made on livestock farming, fishing and tourism. Forestry is undeveloped, but reforestation is underway.

East Timor was at independence in 2002 one of the countries in the world that received the most aid per inhabitant. The aid has gradually shifted from mainly humanitarian aid to longer-term support. Financial support has decreased as revenue from the country's oil and gas industry has grown. A number of countries have completely phased out their bilateral assistance, including Sweden in 2013. The largest donor country is Australia.

More money from the oil fund

Between 2000 and 2001, when the UN was in charge of East Timor, a rapid economic recovery took place from a bottom up. 2002–2003, the economy shrank due to lost jobs in connection with the UN withdrawal following independence in May 2002. Since then, growth has been good, with the exception of the 2006 turmoil, thanks to increased oil and gas revenues and higher returns from agriculture.

Until 2005, East Timor had a large budget deficit, which was covered by aid. The budget for the first three years as an independent state was dominated by poverty reduction, especially investments in basic health care and education. For the financial year 2004/2005, East Timor managed for the first time to cover central government expenditure with its own assets. In 2005, oil and gas revenues had grown so much that East Timor could create an oil fund (see Natural Resources and Energy). The positive trend was temporarily interrupted during the unrest in 2006 but continued the following year. East Timor was not significantly affected by the global economic crisis that erupted in 2008.

In the 2010s, the government continued to invest in poverty reduction, primarily healthcare and schooling, as well as infrastructure and agricultural development with the help of aid and oil and gas revenues.

Government spending is increasing

Since 2009, the government has been covering rising government spending by withdrawing more money from the oil fund. The law sets a limit on withdrawals at 3 percent of the fund's value, but with the help of decisions in parliament, this law can be circumvented. Withdrawals from the fund are now considerably greater than all revenues to the Treasury. The need for funds for the Treasury is justified by the need to fight poverty and the need to invest in developing the non-oil-based economy. Critics warn that corruption has increased in line with access to the funded money.

Oil money is, however, between 30 percent of 40 percent of East Timorans poor (the task varies between different sources). The reasons for this are several. The capital-intensive oil and gas industry is run by foreign companies and creates extremely few jobs for East Timorans, among whom unemployment is very high. Widespread corruption and some mismanagement of the funds are other causes.

Bad about trained staff

Since 2000, thousands of new companies have been registered. A banking system has been established with a central bank and a financial authority, which controls the budget. A major problem for many companies is the lack of trained staff. Many of the highly educated people before independence were immigrant Indonesians who fled in 1999.

East Timor's good growth in the 2000s and 2010s is attributed to large oil and gas revenues, a recovery in the agricultural sector that led to good harvests and large coffee exports, as well as sharply increased government efforts from the government. However, statistics on East Timor's GDP can sometimes be uncertain as oil and gas incomes are not always included.

East Timor records a trade deficit, ie imports are larger than exports. But these statistics do not include oil and natural gas exports, as most of their income is invested in the oil fund. Clearly, oil and natural gas exports have increased and imports of materials for reconstruction have fallen.

FACTS - FINANCE

GDP per person

US $ 2,036 (2018)

Total GDP

US $ 2,581 million (2018)

GDP growth

2.8 percent (2018)

Agriculture's share of GDP

10.4 percent (2017)

Manufacturing industry's share of GDP

1.0 percent (2017)

The service sector's share of GDP

44.1 percent (2017)

Inflation

2.5 percent (2019)

Government debt's share of GDP

6.1 percent (2018)

External debt

US $ 50 million (2017)

Currency

US dollar

Merchandise exports

US $ 17 million (2017)

Imports

US $ 681 million (2017)

Current account

- US $ 339 million (2017)

Commodity trade's share of GDP

24 percent (2018)

Main export goods

coffee, oil, natural gas (2018)

Largest trading partner

Exporting countries (excluding oil and natural gas): USA, Canada, Indonesia, Germany, China. Importing countries: Indonesia, Hong Kong, Singapore, China. (2018)

 

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