The Portuguese began to trade with the island of Timor in the early 16th century and colonized it in mid-century. Skirmishing with the Dutch in the region eventually resulted in an 1859 treaty in which Portugal ceded the western portion of the island. Imperial Japan occupied Portuguese Timor from 1942 to 1945, but Portugal resumed colonial authority after the Japanese defeat in World War II. East Timor declared itself independent from Portugal on 28 November 1975 and was invaded and occupied by Indonesian forces nine days later. It was incorporated into Indonesia in July 1976 as the province of Timor Timur (East Timor). An unsuccessful campaign of pacification followed over the next two decades, during which an estimated 100,000 to 250,000 people died. In an August 1999 UN-supervised popular referendum, an overwhelming majority of the people of Timor-Leste voted for independence from Indonesia. However, in the next three weeks, anti-independence Timorese militias - organized and supported by the Indonesian military - commenced a large-scale, scorched-earth campaign of retribution. The militias killed approximately 1,400 Timorese and forced 300,000 people into western Timor as refugees. Most of the country's infrastructure, including homes, irrigation systems, water supply systems, and schools, and nearly all of the country's electrical grid were destroyed. On 20 September 1999, Australian-led peacekeeping troops deployed to the country and brought the violence to an end. On 20 May 2002, Timor-Leste was internationally recognized as an independent state.
Southeastern Asia, northwest of Australia in the Lesser Sunda Islands at the eastern end of the Indonesian archipelago; note - Timor-Leste includes the eastern half of the island of Timor, the Oecussi (Ambeno) region on the northwest portion of the island of Timor, and the islands of Pulau Atauro and Pulau Jaco
gold, petroleum, natural gas, manganese, marble
Population - distribution
most of the population concentrated in the western third of the country, particularly around Dili
Tetun Prasa 30.6%, Mambai 16.6%, Makasai 10.5%, Tetun Terik 6.1%, Baikenu 5.9%, Kemak 5.8%, Bunak 5.5%, Tokodede 4%, Fataluku 3.5%, Waima'a 1.8%, Galoli 1.4%, Naueti 1.4%, Idate 1.2%, Midiki 1.2%, other 4.5%
DILI (capital) 228,000 (2014)
- Conventional long form
- Democratic Republic of Timor-Leste
- Conventional short form
- Local long form
- Republika Demokratika Timor Lorosa'e [Tetum]; Republica Democratica de Timor-Leste [Portuguese]
- Local short form
- Timor Lorosa'e [Tetum]; Timor-Leste [Portuguese]
- Geographic coordinates
- 8 35 S, 125 36 E
- Time difference
- UTC+9 (14 hours ahead of Washington, DC, during Standard Time)
accepts compulsory ICJ jurisdiction with reservations; accepts ICCt jurisdiction
Since independence in 1999, Timor-Leste has faced great challenges in rebuilding its infrastructure, strengthening the civil administration, and generating jobs for young people entering the work force. The development of offshore oil and gas resources has greatly supplemented government revenues. This technology-intensive industry, however, has done little to create jobs in part because there are no production facilities in Timor-Leste. Gas is currently piped to Australia for processing, but Timor-Leste has expressed interest in developing a domestic processing capacity.
- Total tax rate (% of commercial profits)
- Real Interest Rate
- Manufacturing, value added (% of GDP)
- Current Account Balance
- US$ -533,075,100
- Labor Force, Total
- Employment in Agriculture
- Employment in Industry
- Employment in Services
- Unemployment Rate
- Imports of goods and services
- US$ 1,338,000,000
- Exports of goods and services
- US$ 81,000,000
- Total Merchandise Trade
- FDI, net inflows
- US$ 5,478,700
- Commercial Service Exports
- US$ 61,712,800
coffee, rice, corn, cassava (manioc, tapioca), sweet potatoes, soybeans, cabbage, mangoes, bananas, vanilla
printing, soap manufacturing, handicrafts, woven cloth
- oil, coffee, sandalwood, marble
- food, gasoline, kerosene, machinery
- Country Risk Rating
- The highest-risk political and economic situation and the most difficult business environment. Corporate default is likely.
- Business Climate Rating
- The business environment is very difficult. Corporate financial information is rarely available and when available usually unreliable. The legal system makes debt collection very unpredictable. The institutional framework has very serious weaknesses. Intercompany transactions can thus be very difficult to manage in the highly risky environments rated D.
- Oil and gas reserves in the Sea of Timor
- Support from the Community of the Portuguese-speaking countries
- Vulnerability to natural disasters (landslides, violent winds, flooding)
- Under-development infrastructures
- Deficit of human capital
- Very high dependency on oil revenues (98% of exports)
- Almost half the population lives below the poverty threshold
- High level of unemployment amongst the young (40%)
- Low banking intermediation
Without taking oil production into account in the calculation of GDP, East Timor should continue to grow in 2017. Unless the country discovers new oil wells, it is likely to cease its energy production between now and 2023. This gradual reduction in production is likely to be triggered by an increase in government spending on long-term capital investments. Numerous capital investments have been initiated by the country's oil fund, linked to the Strategic Development Plan (2011-2030) as with the first public-private partnership in the history of the country, in June 2016 (construction of the new port in the Bay of Timor). These investments are likely to be aligned around four pillars, namely healthcare, infrastructure (telecommunications, energy and supply of water and drainage), the promising sectors (agriculture, tourism and petrochemicals) and the institutional framework in order to improve the efficiency of the institutions. Nevertheless, even if foreign-source investments (+18% in 2017) and public investments in infrastructures grew, the poor diversification of the economy would still penalize the country's attractiveness. Consumption is likely to benefit from high domestic demand for electricity, cereals, drinks and construction materials as a result of an increase in lending in the construction and agricultural sectors, whereas sales of cars are likely to fall. In fact imports, which should reach a peak in 2017, will be overrepresented by mineral fuels.
Inflation is historically volatile in East Timor, as a result of the country's exposure to changes in foodstuff and oil prices. It is likely to increase in 2017 as a result of an upturn in domestic demand and the gradual increase in oil prices.
Since 2016, the country has been running a budget deficit as a result of the very significant increase in government expenditure and poor oil revenues (for the 2016 budget, the country had estimated an increase in oil revenues of 24%, whereas in reality they fell by 21%). The deficit is likely to widen sharply in 2017 as a result of a fall in revenues and an increase in expenditures. In fact, capital expenditure is likely to increase significantly. The principal risk for the country is the excessive wastage by oil funds by investing in "white elephants" like the new port which is under construction. Hence, the budget deficit could be greater than initially planned.
In the same way, the current account is likely to post a deficit linked to the sharp increase in the trade and services deficit. Exports of goods, principally coffee, and current transfers should increase slightly in 2017, whereas imports are likely to increase as a result of the need for manufactured goods and equipment. In order to finance the current account deficit, the country is likely to continue to take on external debt, since its external debt is again likely to increase very rapidly (tripled between 2015 and 2016), obliging the country to draw on the country's oil fund.
The government of East Timor, led by the Prime Minister, Rui Maria de Araújo, who succeeded Xanana Gusmão in February 2015, is likely to remain stable until the presidential election in March 2017. Prior to resigning, Mr Gusmão negotiated a government coalition associating the majority and the opposition on the basis of a joint program. Due to the absence of any political opposition to the government, the civil organizations remain the only opposition force in political and budgetary terms. The efficiency of the government's actions is still being called into question by the population, and poverty continues to be very significant. Given that the great majority of the Timorese still live in rural areas and depend on agriculture, the government has been unable to bring dynamic change to the private sector. Consequently, unemployment amongst the young is very significant.
In external matters, the country is disputing the legitimacy of Greater Sunrise with Australia. The argument put forward by Timor is based on disputing the treaty signed in 2006 with Australia. Indeed, the country considers that it was manipulated by the Australians during the negotiation of the treaty, which aimed to redistribute the oil revenues between the two countries and to offer them a respite period of 50 years. This reserve of hydrocarbons would represent an enormous contribution to the country's production capacity; it would postpone the penury to which the government will have to face up in the coming years and would increase the revenues of the country's oil fund. The negotiations, supervised by the International Court of the Law of the Sea, are in progress.