New Straits Times (Malaysia) October 3, 2000

East Timor's investment appeal

By K.P. Waran

THE first revenue collected in East Timor in June following the implementation of the Border Control Service through import and export charges amounted to US$1 million (RM3.8 million).

Since June 30 was the end of the financial year, the United Nations Transitional Authority in East Timor (Untaet) has estimated that total revenue that was collected since the referendum to break-away from Indonesia to be US$2-US$3 million.

For the 2000-2001 budget year, it has been estimated that US$17 million will be collected as revenue and since US$43.63 million has been budgeted for recurrent spendings and US$15.6 million in capital expenditure, the international community is expected to make up the difference through donations.

Catherine Walker, Untaet's donor co-ordination unit director said the Trust Fund for East Timor (TFET), established by the World Bank following the December 1999 Tokyo's donors' meeting, provides grants for economic reconstruction and development activities in East Timor.

Money from the fund is used to rehabilitate roads, ports, water utilities, telecommunications and power which are managed by the Asian Development Bank.

Meanwhile, the World Bank is in charge of projects in the sectors of health, education, agriculture, private sector development and economic capacity building.

She said although there are some countries which are slow in fulfilling their pledges, most nations have come up with the monies. But, in order for the expenditure budgeted for the current fiscal year to be implemented, there is a need for more contributions.

A second Untaet fund was established to pay for the running of the government, paying civil servants salaries and improving the capacities of government deparments, the judicial system, police force and prison administration.

Bilateral donors have also pledged to help implement or upgrade specific projects.

Untaet is currently in the midst of drawing up legislation for the collection of taxes and tariffs which would further boost revenue in the coming years.

Work to reconstruct roads, bridges and buildings is going on in East Timor. For some of the projects, the ADB and other agencies carry out the planning while design and construction is tendered out to both international and locally-registered firms.

Investments are badly needed in East Timor and there are several sectors which have been identified as having tremendous potential.

Jesudas Bell, director of the Investment Institute which is under the Untaet, said East Timor is like a "blank slate" since much of the infrastructure has been destroyed.

Blessed with pristine white beaches, scenic hills and historical sites, tourism is a sector which can take off in East Timor and with the right facilities and services, could challenge other tourist areas in the region.

With good hotels, recreational facilities and an efficient service industry the tourism sector can be a boom industry and already several international investors are eyeing these sectors.

Bell said the agricultural sector also has great potential especially since East Timorese coffee is known to be of high quality while the tropical climate is conducive to many types of crops.

Apart from opening plantations, canning of agricultural produce and investment in the fishing industry have been targeted as viable.

Petroleum and gas reserves have been found in the Timor Gap. Extensive exploration in more areas would help ascertain the extent of these reserves, thus allowing foreign companies to benefit from the joint- ventures with East Timorese partners.

The mineral wealth in this new-born nation has yet to be ascertained and there have been past reports of gold and other minerals. A comprehensive study of the areas could reveal the mining potential.

Bell's department is involved in development of investment policies and providing a one-stop-agency for investors, including giving advice and information, evaluation and processing of the projects and carry out investment promotion.

"We are constantly looking at areas where there can be foreign investment to help contribute to the growth of the local economy," he said.

He said there is increasing potential for more airlines to land in Dili and fly to other destinations. With the tourism infrastructure taking shape, East Timor could draw more foreign exchange from the tourism sector.

East Timorese authorities are also looking into the possibility of privatising services such as airport and port operations and also power utilities, and are willing to look at feasibility studies on these sectors.

The business sector in East Timor is slowly gaining momentum. Last month, 150 business loans for districts outside Dili were approved. The loans totalling US$1.3 million were disbursed to all the districts by the middle of last month.

An initial US$4 million small loans programme was established by the World Bank in April under the Small Enterprises Project to help in the economic reconstruction and rehabilitation of small businesses in East Timor.

Legislation on tax incentives, pioneer status and other benefits are being drawn up and are expected to be in place soon. The number of private businesses registered with the Trade and Commerce office surpassed the 3,200 mark last month, with the majority of the business registered being Timorese.

There are currently 150 Quick Impact Projects, which are aimed at kick starting short term employment projects, with over 5,350 East Timorese employed.

Transitional Employment Projects, which are short-term employment schemes, are in place in all the 13 districts with focus on maintenance of roads, drainage clean-up, and repair of damage buildings.

Bell said investors should visit East Timor to check for themselves the resources, manpower and the investment climate so that they can make a rational decision.

"My department is more than happy to provide information, help and also introduce possible joint-venture partners. Companies which are known to invest in this region should give East Timor a chance. Apart from helping the economic growth, it could be mutually beneficial to the investors," he said.

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