Economy of East Timor
Encyclopedia
The economy of East Timor
is ranked as a lower-middle income economy by the World Bank
. It is placed 158th by Human Development Index
, indicating a low level of human development. 20% of the population is unemployed, and 52.9% lives on less than US $1.25 a day. About half of the population is illiterate.
The country continues to suffer the after effects of a decades-long independence struggle
against Indonesia
, which damaged infrastructure and displaced thousands of civilians.
In 2007, a bad harvest led to deaths in several parts of Timor-Leste. In November 2007, eleven subdistricts still needed food supplied by international aid.
There are no patent laws in East Timor.
. The Portuguese colonial administration granted concessions to Oceanic Exploration Corporation to develop the deposits. However, this was curtailed by the Indonesian invasion in 1976. The resources were divided between Indonesia and Australia with the Timor Gap Treaty
in 1989. The treaty established guidelines for joint exploitation of seabed resources in the area of the "gap" left by then-Portuguese Timor in the maritime boundary
agreed between the two countries in 1972. Revenues from the "joint" area were to be divided 50%-50%. Woodside Petroleum
and ConocoPhillips
began development of some resources in the Timor Gap on behalf of the two governments in 1992.
In late 1999, about 70% of the economic infrastructure of East Timor was destroyed by Indonesian troops
and anti-independence militias, and 260,000 people fled westward. From 2002 to 2005, an international program led by the United Nations
, manned by civilian advisers, 5,000 peacekeepers (8,000 at peak) and 1,300 police officers, substantially reconstructed the infrastructure. By mid-2002, all but about 50,000 of the refugees had returned.
and natural gas
resources in the waters southeast of Timor.
East Timor inherited no permanent maritime boundaries when it attained independence, repudiating the Timor Gap Treaty as illegal. A provisional agreement (the Timor Sea Treaty
, signed when East Timor became independent on 20 May 2002) defined a Joint Petroleum Development Area (JPDA), and awarded 90% of revenues from existing projects in that area to East Timor and 10% to Australia. The first significant new development in the JPDA since Timorese independence is the largest petroleum resource in the Timor Sea, the Greater Sunrise gas field. Its exploitation was the subject of separate agreements in 2003 and 2005. Only 20% of the field lies within the JPDA and the rest in waters not subject to the treaty (though claimed by both countries). The initial, temporary agreement gave 82% of revenues to Australia and only 18% to East Timor.
The government of East Timor has sought to negotiate a definite boundary with Australia at the halfway line between the countries, in accordance with the United Nations Convention on the Law of the Sea
. The government of Australia preferred to establish the boundary at the end of the wide Australian continental shelf
, as agreed with Indonesia in 1972 and 1991. Normally a dispute such as this would be referred to the International Court of Justice
or the International Tribunal for the Law of the Sea
for an impartial decision, but the Australian government had withdrawn itself from these international jurisdictions (solely on matters relating to maritime boundaries) shortly before Timorese independence.
Nevertheless, under public and diplomatic pressure, the Australian government offered instead a last-minute concession on Greater Sunrise gas field royalties alone. On July 7, 2005, an agreement was signed under which both countries would set aside the dispute over the maritime boundary, and East Timor would receive 50% of the revenues (estimated at A$
26 billion or about US$
20 billion over the lifetime of the project) from the Greater Sunrise development. Other developments within waters claimed by East Timor but outside the JPDA (Laminaria-Corallina and Buffalo) continue to be exploited unilaterally by Australia, however.
Some proceeds from East Timor's petroleum royalties are directed to the country's sovereign wealth fund, the Timor-Leste Petroleum Fund
.
East Timor
The Democratic Republic of Timor-Leste, commonly known as East Timor , is a state in Southeast Asia. It comprises the eastern half of the island of Timor, the nearby islands of Atauro and Jaco, and Oecusse, an exclave on the northwestern side of the island, within Indonesian West Timor...
is ranked as a lower-middle income economy by the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
. It is placed 158th by Human Development Index
Human Development Index
The Human Development Index is a composite statistic used to rank countries by level of "human development" and separate "very high human development", "high human development", "medium human development", and "low human development" countries...
, indicating a low level of human development. 20% of the population is unemployed, and 52.9% lives on less than US $1.25 a day. About half of the population is illiterate.
The country continues to suffer the after effects of a decades-long independence struggle
Indonesian occupation of East Timor
Indonesia occupied East Timor from December 1975 to October 1999. After centuries of Portuguese colonial rule in East Timor, a 1974 coup in Portugal led to decolonization among its former colonies, creating instability in East Timor and leaving its future uncertain...
against Indonesia
Indonesia
Indonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...
, which damaged infrastructure and displaced thousands of civilians.
In 2007, a bad harvest led to deaths in several parts of Timor-Leste. In November 2007, eleven subdistricts still needed food supplied by international aid.
There are no patent laws in East Timor.
History
Prior to and during colonization, Timor was best known for its sandalwoodSandalwood
Sandalwood is the name of a class of fragrant woods from trees in the genus Santalum. The woods are heavy, yellow, and fine-grained, and unlike many other aromatic woods they retain their fragrance for decades. As well as using the harvested and cut wood in-situ, essential oils are also extracted...
. The Portuguese colonial administration granted concessions to Oceanic Exploration Corporation to develop the deposits. However, this was curtailed by the Indonesian invasion in 1976. The resources were divided between Indonesia and Australia with the Timor Gap Treaty
Timor Gap Treaty
Officially known as the Treaty between Australia and the Republic of Indonesia on the zone of cooperation in an area between the Indonesian province of East Timor and Northern Australia, the Timor Gap Treaty is a treaty between the governments of Australia and Indonesia...
in 1989. The treaty established guidelines for joint exploitation of seabed resources in the area of the "gap" left by then-Portuguese Timor in the maritime boundary
Maritime boundary
Maritime boundary is a conceptual means of division of the water surface of the planet into maritime areas that are defined through surrounding physical geography or by human geography. As such it usually includes areas of exclusive national rights over the mineral and biological resources,...
agreed between the two countries in 1972. Revenues from the "joint" area were to be divided 50%-50%. Woodside Petroleum
Woodside Petroleum
Woodside Petroleum Limited is an Australian petroleum exploration and production company. It is a public company listed on the Australian Securities Exchange and has its headquarters in Perth, Western Australia.-History:...
and ConocoPhillips
ConocoPhillips
ConocoPhillips Company is an American multinational energy corporation with its headquarters located in the Energy Corridor district of Houston, Texas in the United States...
began development of some resources in the Timor Gap on behalf of the two governments in 1992.
In late 1999, about 70% of the economic infrastructure of East Timor was destroyed by Indonesian troops
Military of Indonesia
The Indonesian National Armed Forces in 2009 comprises approximately 432,129 personnel including the Army , Navy including the Indonesian Marine Corps and the Air Force ....
and anti-independence militias, and 260,000 people fled westward. From 2002 to 2005, an international program led by the United Nations
United Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...
, manned by civilian advisers, 5,000 peacekeepers (8,000 at peak) and 1,300 police officers, substantially reconstructed the infrastructure. By mid-2002, all but about 50,000 of the refugees had returned.
Oil and gas
One promising long-term project is the joint development with Australia of petroleumPetroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
and natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
resources in the waters southeast of Timor.
East Timor inherited no permanent maritime boundaries when it attained independence, repudiating the Timor Gap Treaty as illegal. A provisional agreement (the Timor Sea Treaty
Timor Sea Treaty
Formally known as the Timor Sea Treaty between the Government of East Timor and the Government of Australia was signed between Australia and East Timor in Dili, East Timor on May 20, 2002, the day East Timor attained its independence from United Nations rule, for joint petroleum exploration of the...
, signed when East Timor became independent on 20 May 2002) defined a Joint Petroleum Development Area (JPDA), and awarded 90% of revenues from existing projects in that area to East Timor and 10% to Australia. The first significant new development in the JPDA since Timorese independence is the largest petroleum resource in the Timor Sea, the Greater Sunrise gas field. Its exploitation was the subject of separate agreements in 2003 and 2005. Only 20% of the field lies within the JPDA and the rest in waters not subject to the treaty (though claimed by both countries). The initial, temporary agreement gave 82% of revenues to Australia and only 18% to East Timor.
The government of East Timor has sought to negotiate a definite boundary with Australia at the halfway line between the countries, in accordance with the United Nations Convention on the Law of the Sea
United Nations Convention on the Law of the Sea
The United Nations Convention on the Law of the Sea , also called the Law of the Sea Convention or the Law of the Sea treaty, is the international agreement that resulted from the third United Nations Conference on the Law of the Sea , which took place from 1973 through 1982...
. The government of Australia preferred to establish the boundary at the end of the wide Australian continental shelf
Continental shelf
The continental shelf is the extended perimeter of each continent and associated coastal plain. Much of the shelf was exposed during glacial periods, but is now submerged under relatively shallow seas and gulfs, and was similarly submerged during other interglacial periods. The continental margin,...
, as agreed with Indonesia in 1972 and 1991. Normally a dispute such as this would be referred to the International Court of Justice
International Court of Justice
The International Court of Justice is the primary judicial organ of the United Nations. It is based in the Peace Palace in The Hague, Netherlands...
or the International Tribunal for the Law of the Sea
International Tribunal for the Law of the Sea
The International Tribunal for the Law of the Sea is an intergovernmental organization created by the mandate of the Third United Nations Conference on the Law of the Sea. It was established by the United Nations Convention on the Law of the Sea, signed at Montego Bay, Jamaica, on December 10, 1982...
for an impartial decision, but the Australian government had withdrawn itself from these international jurisdictions (solely on matters relating to maritime boundaries) shortly before Timorese independence.
Nevertheless, under public and diplomatic pressure, the Australian government offered instead a last-minute concession on Greater Sunrise gas field royalties alone. On July 7, 2005, an agreement was signed under which both countries would set aside the dispute over the maritime boundary, and East Timor would receive 50% of the revenues (estimated at A$
Australian dollar
The Australian dollar is the currency of the Commonwealth of Australia, including Christmas Island, Cocos Islands, and Norfolk Island, as well as the independent Pacific Island states of Kiribati, Nauru and Tuvalu...
26 billion or about US$
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
20 billion over the lifetime of the project) from the Greater Sunrise development. Other developments within waters claimed by East Timor but outside the JPDA (Laminaria-Corallina and Buffalo) continue to be exploited unilaterally by Australia, however.
Some proceeds from East Timor's petroleum royalties are directed to the country's sovereign wealth fund, the Timor-Leste Petroleum Fund
Timor-Leste Petroleum Fund
The Timor-Leste Petroleum Fund is a sovereign wealth fund into which the surplus wealth produced by East Timor petroleum and gas income is deposited by the East Timorese government.The fund was established in 2005 with an opening balance of $205 million...
.