Timor-Leste’s Economic Hurdles: Lack of Production Facilities Hinders Job Creation

Despite its significant petroleum wealth, Timor-Leste has struggled to create jobs and stimulate economic growth due to a lack of production facilities within the country.

Challenges in Managing Oil Revenues

The National Parliament unanimously approved the creation of the Petroleum Fund in June 2005 to manage the country’s oil revenues. The fund currently holds assets of $16.5 billion, according to December 2014 figures. However, concerns have been raised about the long-term sustainability of government spending due to the drop in oil prices in 2014.

• Annual government budget expenditures increased significantly between 2009 and 2012 but dropped dramatically in 2013-15.
• Historically, the government has failed to spend as much as its budget allowed, focusing instead on basic infrastructure projects such as electricity and roads.

Reliance on Oil and Gas Exports

Timor-Leste’s economy is heavily reliant on oil and gas exports, with coffee, sandalwood, and marble being other significant export commodities. The country imports food, gasoline, kerosene, and machinery.

Government Efforts to Improve Infrastructure and Fiscal Reforms

Despite these challenges, the government remains committed to improving the country’s infrastructure and implementing fiscal reforms to bring its system into compliance with international best practices. Timor-Leste is also working to join the Association of Southeast Asian Nations (ASEAN) and has pursued trilateral economic cooperation with Indonesia and Australia to boost cross-country investment.

Limitations in Job Creation

However, a lack of production facilities within the country hinders job creation and economic growth. Foreign firms have been contracted to explore and develop offshore oil and gas deposits, but these operations are not generating employment opportunities for local residents.

• The government is interested in expanding private sector economic activities to provide employment for new labor market entrants.
• Timor-Leste’s authorities are also working to establish international ties, including its application for full membership into ASEAN, to increase investment opportunities within the country.

Path Forward

Despite these efforts, the lack of production facilities remains a significant hurdle to overcome if Timor-Leste is to achieve its goal of becoming a middle-income country by 2030. To address this challenge, the government must prioritize the development of domestic industries and attract foreign investment in sectors that can create employment opportunities for local residents.