By

Emilia Pires Minister of Finance of Timor-Leste

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TIMOR-LESTE ECONOMIC AND FINANCIAL STRENGTH

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1.  Timor-Leste’s SDP - SDP Vision - Strategy to Modernize and Diversify Economy 2.  Major Economic Policies 3.  Timor-Leste’s Economic Growth 4.  Tax & Custom Reforms 5.  Revenue for Timor-Leste 6.  Infrastructure Development 7.  Public-Private Partnership 8.  Loans 9.  Transparency Portals

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STAGE I

• Human Resources Development;

• Infrastructure; • Strategic Industries.

STAGE II

• Infrastructure; • Strengthening Human Resources;

• Market Formation.

Stage III

• Eradication of Extreme Poverty;

• Strong Private Sector;

• Diversified Non-oil Economy.

Short-Term 2011-2015 Mid-Term 2016-2020 Long-Term 2021-2030

STRATEGIC DEVELOPMENT PLAN 2011-2030 “Vision :Timor-Leste to be an upper-middle income country by 20130”

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STRATEGIC DEVELOPMENT PLAN 2011-2030 “Vision :Timor-Leste to be an upper-middle income country by 20130”

AGRICULTURE TOURISM

PETROLEUM

MODERNIZE AND DIVERSIFY ECONOMY

TRANSFORMING STRUCTURE OF ECONOMY

KEY SUPPORTING SECTOR: Infrastructure and Human Capital Development

Major Economic Policies

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  Inclusive and high economic growth rate;  “Front loading” for infrastructure and human capital

development;  “Transparency” of Public Financial Management and Petroleum

Fund;  “Tax reform” to provide incentive for private sector

investment;  “SME development” via PDD, PDID and PNDS;  “Transformed” BPA and MFI to BCTL and BNCTL;  “Loans” for infrastructure – “cheap money”;  “PPP” for Airports and Tibar Port;

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*PreliminaryEs.ma.on.Note:AllfiguresarebasedontheupdatedfiguresfromNa.onalAccount.

2004 2005 2006 2007 2008 2009 2010 2011*

TotalGDPGrowthRate(%) 54.8 61.9 ‐0.8 12.1 ‐7.0 ‐1.6 7.0

OilGDPGrowthRate(%) 77.6 79.9 ‐2.7 11.6 ‐10.6 ‐4.1 6.0

Non‐OilGDPGrowthRate(%) 6.4 ‐1.8 11.6 14.7 12.8 9.5 10.8

TotalGDP($M) 1,621.8 2,510.5 4,065.1 4,034.4 4,521.8 4,206.2 4,140.4 4,430.6

OilGDP($M) 1,102.2 1,957.5 3,522.0 3,428.1 3,826.3 3,421.7 3,281.3 3,478.4

Non‐OilGDP($M) 519.6 553 543.1 606.3 695.5 784.6 859.1 952.2

TotalGDPPer‐Capita($) 1,703.6 2,578.5 4,082.5 3,961.7 4,341.7 3,949.0 3,800.9 3,954.5

OilGDPPer‐Capita($) 1,157.8 2,010.5 3,537.1 3,366.3 3,673.9 3,212.5 3,012.3 3,104.6

Non‐OilGDPPer‐Capita($) 545.8 568.0 545.4 595.4 667.8 736.6 788.7 849.9

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6.4%

-1.8%

11.6%

14.7%

12.8% 9.5%

10.8% 10.6% 10.4%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

200

400

600

800

1,000

1,200

1,400

1,600

2005 2006 2007 2008 2009 2010 2011 2012 2013

$ m

illio

ns

Nominal GDP, Non-Oil Sector ($ millions) Real Non-Oil GDP Growth Rate (%)

Note:2011ispreliminaryes.ma.on;2012and2013aretargets.

Tax and Custom Reforms

TL reform tax is one of the lowest in the world and gives incentive for investment

• Income tax 10% (general); •  Service tax – 5%, only for some industries; •  “Withholding tax” - 10% (general); • “Thresholds” of income tax is $500 for individual and $6000 for companies; • Generous tax deduction:

 100% Deduction for cost of depreciable assets and business buildings;  100% Deduction for cost of trading stock/inventor.

•  Import duty 2.5%, Sales Tax 2.5%, no Excise tax – (varied depend on goods (example: cigarettes, alcohol, fuel and cars);

•  National Single Window and New Integrated Border Posts.

Customs and Taxes

Some Components of Tax Reforms

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90.8 96.4 108.5 134.1 146.3

163.1 181.7

200.3 218.7

$0

$50

$100

$150

$200

$250

2009

act

ual

2010

act

ual

2011

act

ual

2012

bud

get*

2013

bu

dget

**

2014

bud

get

2015

bud

get

2016

bud

get

2017

bud

get

($ Million)

10

104

309 321

830

0

604 760

1096

1807 1648

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

2009 actual 2010 actual 2011 actual 2012 budget* 2013 budget**

Excess Withdrawals ($ Million) Total Expenditure ($ Million)

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6,904.00

9,310.30

10,776.70

12,787.60 13,687.00

14,835.50 16,092.90

0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

16,000.00

18,000.00

2011 Actual 2012 Estimate 2013 Budget 2014 Projection

2015 Projection

2016 Projection

2017 Projection

Opening Petroleum Fund Balance ($ Million)

Total Revenue from Petroleum Sector Bayu-Undan & Kitan

Exp

ecte

d Fu

ture

Rev

enue

R

even

ue E

arne

d

$30bil

$10.5bilPetroleum Fund Balance: $11.8 bil Revenue saved: $10.5 bil Investment revenue: $1.3 bil

$4.6bil

TotalPetroleumRevenue

TotalRevenueSaved

TotalRevenueSpent

$15.1bil

Infrastructure Fund by Program 2013

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Programa de Agricultura e

Pescas 7,953.05

1%

Programa de Agua e Saneamento

10,098.00 2%

Programa Desemv Urbano e Rural

6,576.07 1%

Programa de Electricidade 123,666.90

22%

Programa de Estradas 88,084.98

16%

Programa de Pontes

18,289.13 3%

Programa do Sector Aeroportos

8,466.85 2%

Programa do Sector de Portos 10,975.00

2%

Programa de Informatica 10,490.56

2%

Programa de Edificios Publicos 40,668.39

7%

Programa do Sector Educaçao 9,134.58

2%

Objectivo Desemvolvimento

Milenio 46,263.25

8%

Programa do Sector Saude

2,040.53 0%

Programa de Seguranca e Defesa

17,598.94 3%

Programa de Solidaridade Social

1,662.92 0%

Programa Desenvolvimento Tasi Mane 139,402.00

25%

Preparação de Desenhos e Supervisao-Novos Projectos

19,417.86 3%

“Loans”: Project Description

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  ADB   JICA

 Project: Road Network Upgrading Sector Project

 Estimated period : 2012-2016

 Estimated Cost : $ 53.66 million

(ADB $40 million and GoTL $13.66 million)

 Components

 Dili-Liquica, 28.6 km

 Tibar-Gleno, 31 km

 2 years maintenance after physical construction

 Strengthen PMU

 Feasibility study and design for Manatuto-Natarbora, 81 km

 Project: National Road No.1 Upgrading Project

 Estimated period : 2012-2017

 Estimated cost : $92.63 million

(JICA $68.72 million and GoTL $23.92 million )

 Components

 Dili-Baucau, 116 km

 “Consulting Services”

•  Signed in May 2, 2012 in Manila, Philippine Implementation: Mobilization contractor

•  Signed in March 19, 2012 in Tokyo, Japan •  Implementation: Consultanting service

Public-Private Partnership

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Estimated Time Line Completion of Phase I of FASA: Mar 2013 Decision on Transaction: April 2013 Completion of Phase II of FASA: Oct 2013 Negotiation & Signing of Contract: Nov 2013 Start Construction: Jan 2014 Completion of Construction: Mar 2017

Estimated Time Line Completion of Phase I of FASA: Sep 2013 Decision on Transaction: Nov 2013 Completion of Phase II of FASA: Nov 2014 Negotiation & Signing of Contract: Jan 2015 Start Construction: Apr 2015 Completion of Construction: Mar 2020

Projects in the PPP pipeline

Betano Power Station O&M; Operation and Maintenance of Mof New Office Building; Operation and Maintenance of Water and Sanitation Infrastructures.

Dili Airport

Tibar Bay Port

Timor-Leste IFMIS Systems 16