Timor-Leste in 2013: Charting Its Own Course

Timor-Leste

The year 2013 proved to be a significant one in Timor-Leste’s political history as the country sought to chart a new course after more than a decade of reliance on international state-building and peacekeeping assistance. A great deal was at stake in this transition, given the departure of peacekeepers from the UN Integrated Mission in Timor-Leste (UNMIT) and the Australian-led International Stabilization Force (ISF) in late 2012. The withdrawal of the earlier United Nations Mission of Support in East Timor (UNMISET) mission in 2005 had proved precipitous as the country quickly descended into the political-military crisis of 2006 and UN peacekeepers had to hastily return in April and May of that year. With these legacies in the background, the Timor-Leste government in 2013 sought to lay the groundwork for a new chapter in the country’s history.

Compared to these earlier years, 2013 was refreshingly uneventful as the country remained stable with a growing if still highly uneven economy. This stability built on a successful year in 2012 when three rounds of national elections were held. They saw the former independence movement leader, Xanana Gusmão, returned as Prime Minister at the head of a new streamlined coalition of three parties led by his National Congress of the Timorese Reconstruction (CNRT) party. The new government was buttressed by the popular figure of another former military resistance leader, Taur Matan Ruak, as President. Economic growth remained strong in 2013, driven by the government’s continued investment in major infrastructure developments.

However, behind this new found stability and slowly improving development indicators lay deeper questions of sustainability, with finite petroleum resources the main driver of the large budget expenditures, a demographic bulge of young East Timorese about to enter an overstretched labour market, and the likelihood of critical political leadership transition in the next two years.

Economic Performance and Development Indicators

Timor-Leste’s economic performance was enviable in key headline respects, included among them its place among the ten fastest growing economies in 2013, with impressive economic growth above 10 per cent per annum from 2007–12, and with a decline in the poverty rate from 50 per cent to 37.4 per cent over the last five years.¹ Most of this growth was driven by government spending drawing on returns from Timor-Leste’s petroleum fund which now stands at US$14.6 billion. Timor-Leste remained highly dependent on petroleum revenues at 95 per cent of national income, second only to South Sudan in that regard, with the small balance dominated by coffee exports. While a new middle class thrived on government contracts for infrastructure development, employment growth from the oil revenues was relatively limited, and spending-fuelled inflation remained high at 13 per cent for the first half of 2013.² Modest job growth remained dependent on public sector expenditure of oil and gas revenues, with little progress in economic diversification.³ Despite an overall reduction in poverty, less progress was evident in rural areas, which saw declining agricultural output over 2013, and where relative underinvestment in education and agriculture was felt most keenly.⁴ Timor-Leste also remained heavily dependent on imports, with a balance of trade for 2012 running some US$670 million imports against US$31 million exports. Another measure of Timor-Leste’s dependence on petroleum revenue was evident in GDP per capita which stood at US$5,176 in 2011, of which an estimated US$4,169 was from petroleum revenues.⁵

Unemployment, estimated nationally at 9.8 per cent in 2010,⁶ was considerably higher in the growing youth demographic, running at 22 per cent for 20–24 years old, and as high as 27 per cent for 15–19 year old.⁷ Despite substantial improvement in the infant mortality rate (down by one-third since the early years of independence), some 58 per cent of Timorese children were found to be malnourished.⁸ The Global Hunger Index rated Timor-Leste 75th out of 78 countries, highlighting the...