Developing Timor-Leste’s Non-Oil Economy: Challenges and Prospects

Timor-Leste, which regained its independence on 20 May 2002, is one of the most oil- dependent countries in the world. Its total Petroleum Fund savings are in excess of US$12 billion and are a primary source of government revenue. Given the volatility of oil prices, the Timor-Leste government has been placing greater emphasis on developing its non-oil economy. Together with its development partners, it has laid out various plans to improve non-oil sectors. In July 2011, Prime Minister Xanana Gusmão launched the Strategic Development Plan (2011–30), which sets out the nation’s long-term goals for economic growth and poverty reduction. According to a 2007 Timor-Leste Survey of Living Standards, about half of the population lived below the national poverty line; estimated at US$0.88 per capita per day. More than 80 per cent of the people in Timor-Leste depend on subsistence agriculture using very simple and traditional methods; they are therefore highly exposed to food insecurity. This article argues for an integrated and ambitious rural development strategy (with infrastructure) to promote sustainable economic development in Timor-Leste. Public investment should be linked to the rural farm economy as well as to the rural non-farm economy in order to reduce poverty. The combination of both farm and non-farm economies will reduce the risk of failure in promoting rural development.