DILI, 28 November 2019 (TATOLI) – President Francisco Guterres Lú Olo said Timor-Leste has an “urgent” need to diversify its economy away from oil and gas, and invest in local agriculture and manufacturing.
In a speech at the Government Palace in Dili for Timor-Leste’s Independence Day, President Lú Olo said the country cannot expect to attract foreign investment until it demonstrates sustainable development.
“An economy that only depends on one product makes the country weak and it can lose its sovereignty. Hence it is very urgent to diversify our economy, to get rid of dependency to oil and gas through the development of the private sector, such as agriculture… manufacturing and tourism,” he said.
In a scathing assessment of the ongoing Budget 2020 (OJE) discussions, President Lú Olo said the government spending continues to well outpace its revenue.
“Every year [the OJE] become bigger and more unrealistic, because we don’t want to spend time for on detailed discussion about the fundamental issue of budget balance,” he said.
The Petroleum Fund, a US $17.55 billion fund comprised mostly of oil revenues, is responsible for around 90 per cent of the revenue in the OJE. But the government has extracted more from the fund — above the ‘Estimated Sustainable Income’ benchmark — every year for the last five years. NGO La’o Hamutuk has estimated that, at current spending rates, the fund will be depleted as soon as 2023, unless further revenue is sourced.
The issue of resource dependency is a concern for many stakeholders in Timor-Leste. In its Country Partnership Framework for Timor-Leste 2020-2024, released this week, the World Bank warns Timor cannot rely on public spending on infrastructure projects to sustain economic growth.
“The public sector-driven growth model has run its course,” the report reads.
“Economic diversification in the face of large petroleum rents requires strict limits on the domestic absorption of such rents to dampen Dutch-disease effects and permit investment resources to flow into the traded goods sector.”
Dutch-disease refers to slump in demand in the wider economy, such as local manufacturing, which can occur in resources-dominated countries.
President Lú Olo said he doesn’t want to see the freedoms won during independence 20 years ago to be squandered.
“We feel that is easy to take the budget from the oil and gas fund to cover all the public expenses that used to come from hard work, discipline, sacrifice and intelligence. All the value that we learned from our fight for national liberation, yet today we move all away,” he said.
He said a sustainable Timor-Leste must invest in the health and quality of life of its citizens.
“Healthy people, quality education [is needed] for us to have a society that lives with good services and progress, according to our constitution,” he said.
First published in Tetum as: PR Lú Olo Konsidera Urjente Tebes Diversifika Ekonomia
Journalist: Cipriano Colo; additional reporting by Robert Baird
Editor: Xisto Freitas
Translation: Nelia Borges
