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.
-
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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.
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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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