KEY RESULTS

• Diversification of the economy | In line with recommendations from its 2010 Diagnostic Trade Integration Study (DTIS), the Enhanced Integrated Framework (EIF) helped Timor-Leste reduce its dependence on oil and gas and develop its agriculture, tourism, fisheries, light manufacturing and mining sectors. 
• Rapid WTO accession | The EIF played a key role in Timor-Leste’s rapid accession process to the World Trade Organization (WTO). On 30 August 2024, Timor Leste became the WTO’s 166th member. 
• Trade facilitation | The EIF supported paperless trade in Timor-Leste to remove bottlenecks at the border and promote cross-border electronic commerce. 
• Seizing opportunity for women in the tourism sector | The EIF supported Timor-Leste’s post-COVID-19 tourism recovery through a successful initiative aimed at promoting women’s involvement in the sector. 
• Scaled-up role of women in the coffee sector | Support from the EIF and other partners increased the presence of women in the coffee sector value chain while improving quality, quantity and export revenues and establishing a Women’s School of Leadership (WSOL). 

Having achieved independence in 2002 and boasting a population of only 1.3 million people, Timor-Leste is the youngest and the second least-populated country in Southeast Asia. Despite this, the country has achieved significant progress in terms of human development, mainly driven by revenue from offshore oil and gas. According to the World Bank, the proportion of Timorese living in poverty declined from 50% in 2007 to an estimated 42% in 2014. 

Surplus oil and gas revenues go into a sovereign fund, the Timor-Leste Petroleum Fund, which was established in 2005. According to the World Bank's Timor-Leste Economic Report 2021, the country has also achieved significant declines in child and maternal mortality rates, increases in youth literacy, and improvements in energy and transport infrastructure. 

However, Timor-Leste still faces high malnutrition rates, with the second-highest percentage of stunted children under five years old in 2020. Moreover, about 60% of consumption products in local markets are supplied by imported goods from neighbouring countries. The government of Timor-Leste has also underlined that increasing national agriculture and industrial production has been a major constraint since the country gained independence in 2002.

The country’s Strategic Development Plan (SDP 2011-2030) captures its vision to eradicate poverty, achieve a safe, well-educated and healthy population, and attain upper middle-income status by 2030. Although Timor-Leste has fulfilled the criteria for graduation from the LDC category for four consecutive periods, in 2015, 2018, 2021 and 2024, the United Nations (UN) Committee for Development Policy’s 2024 Triennial Review recommended Timor-Leste deferring the graduation to 2027. This recommendation was owing to concerns about the sustainability of the country’s economic development progress, its vulnerability to climate change disasters, and ongoing uncertainty surrounding economic diversification away from dependency on oil and gas.

Partnering for sustainable prosperity and growth

Aware of the finite nature of natural resources, the Government of Timor-Leste has placed diversification at the centre of its plans for future growth. The EIF began its engagement with the country in 2009, with support for country-owned, evidence-based research and analysis to help identify priorities to guide its path toward economic diversification and address constraints to trade integration. 

To this end, the EIF built institutional capacity to mainstream trade and led an inclusive consultative process. In 2010, staff and consultants were hired to establish the EIF National Implementation Unit (NIU), and a study tour to Cambodia was undertaken to learn best practices. That same year, the NIU organized a pre-DTIS validation workshop, which was attended by government ministries and departments, donors and civil society representatives, including non-governmental organizations.

Subsequently, EIF support (with the World Bank as the implementing partner) led to the development of Timor-Leste's 2010 DTIS, entitled Expanding Timor-Leste’s Near-Term Non-Oil Exports. The DTIS provided analytical tools for trade mainstreaming and a common base for prioritization and resource mobilization, including through donor support. It recognized Timor-Leste as having one of the most liberal trade policy regimes in the world and sound macroeconomic policies, but noted the country's limited institutional structures for developing and coordinating trade policy. The DTIS’s short-term result areas with immediate potential for diversification – specifically in agriculture, tourism, fisheries, light manufacturing and mining – were integrated into the Timor-Leste Strategic Development Plan 2011-2030.  

Timor-Leste re-engaged with EIF soon after starting the process of accession to the WTO in 2015. The EIF supported the negotiation processes, which Timor-Leste viewed as necessary for leveraging improvements in institutional reform (focusing on trade infrastructure), human capital and administrative skills to speed up growth, trade integration and economic diversification. In line with DTIS recommendations and the Strategic Development Plan, the EIF also supported tourism recovery, paperless trade, and the country’s coffee sector.

Rapid progress to global trade integration

Only seven years after starting its journey, Timor-Leste signed the protocol to join the WTO in February 2024 at its 13th Ministerial Conference and formally acceded on 30 August 2024. This was the fastest LDC accession process ever. The feat was especially remarkable considering that the active negotiation process picked up in late 2020, during the COVID-19 pandemic. 

On the road to Timor-Leste’s WTO accession, the EIF bolstered the establishment of structures to support accession and strengthened institutional coordination for trade development and investment in the country. It also helped improve evidence-based policy and regulatory frameworks for trade and investment. 

The EIF supported the establishment of the Inter-Ministerial Commission of the WTO, which falls under the Minister for the Coordination of Economic Affairs – the Chief Negotiator for Timor-Leste’s accession. The Inter-Ministerial Commission of the WTO, composed of nine ministers and a technical working group, with additional members including private sector representatives, was responsible for drafting and preparing responses to requirements set by WTO member countries. 

The EIF – in concert with the NIU in Timor-Leste – also helped establish the National Secretariat for WTO Accession and supported technical working group consultations with the private sector, civil society organizations, academia, development partners and the public.

Improving the business environment by facilitating cross-border trade 

The EIF responded to the DTIS’s recommendation to strengthen Timor-Leste’s business environment for facilitating international trade by supporting the development of paperless trade action plans. The goal was to remove bottlenecks and promote seamless cross-border electronic commerce. The EIF supported a multi-country project (covering Timor-Leste, Bangladesh, Cambodia and Nepal), implemented by the UN Economic and Social Commission for Asia and the Pacific (UNESCAP), to prepare readiness assessments for cross-border paperless trade and organized national technical readiness consultations conducted by the ESCAP Interim Intergovernmental Steering Group on Cross-Border Paperless Trade Facilitation, of which Timor-Leste is a member. 

In June 2019, the team conducted interviews with relevant government agencies and private sector stakeholders. This was followed by a national consultation, supported by the EIF and co-organized by Timor-Leste’s Ministry of Tourism, Trade and Industry (MTCI) and ESCAP in September. At the consultation, preliminary findings were presented, reviewed, consolidated and validated. Overall, the project contributed to increased knowledge and awareness among government officials regarding trade procedures and cross-border electronic exchange of trade-related data. 

In 2022, the Council of Ministers approved a draft Government Resolution confirming accession to the Framework Agreement on the Facilitation of Paperless Cross-border Trade in Asia and the Pacific. The Framework Agreement has provided Asian and Pacific member countries with a new tool and digital complement to better implement the WTO’s Trade Facilitation Agreement. It also supports the development of cross-border e-commerce through a common set of general principles and a dedicated intergovernmental platform. 

Tackling the agriculture gender gap through skills empowerment

The DTIS highlighted the importance of the agriculture sector as having potential for export diversification. It recommended that this could be done by improving farmer and agro-processor skills, extending technology use to farmers, and developing agricultural export markets. The focus would be on livestock, coffee and grains, as well as improving sanitary and phytosanitary certification capacity. 

The EIF targeted the coffee sector, where most producers are women. This provided an opportunity to demonstrate the potential for diversifying exports while, at the same time, empowering women farmers along the value chain. In addition, the next step is targeted at SMEs (local farmers) by concentrating on selected products to help boost local farmers’ incomes and increase their market productivity. This plan aligns with the vision of Timor-Leste’s WTO post-accession strategies implementation.

The EIF worked with the Government of Timor-Leste and partners, Fairtrade Australia and New Zealand (ANZ), to improve gender-sensitive and climate-resilient market access and empower women in the coffee sector. This was achieved by building the capacity of one small-scale producer organization. The project tied into Fairtrade’s strategy to increase consumer demand by promoting awareness, engagement, sales and advocacy for the Fairtrade brand and products. The mainly women producers were able to export 10 containers of coffee certified as Fairtrade and organic – valued at USD 525,000 – to Canada, Japan and the United States of America.

The EIF partnership with Fairtrade ANZ went further to establish a Women’s School of Leadership in 2022. The first cohort of students, drawn from Fairtrade coffee cooperatives, graduated in 2022. They received training on a range of issues, including income diversification, sustainable farming practices and gender equality. Support continues after graduation in the form of guidance to help them achieve planned activities within their communities. 

According to Amy Child, a Gender and Child Protection Adviser for Fairtrade ANZ, the school focuses on ensuring that both men and women understand the value of women in business, leadership, farming and all parts of society. “The hope is that all the participants go on to become gender equality ambassadors and leaders in their own communities so that change happens from the ground up,” she said.

Women’s empowerment and tourism recovery 

The EIF, through its Empower Women, Power Trade initiative, collaborated with Timor-Leste’s MTCI, the UN World Tourism Organization (UNWTO) and the East Timor Development Agency (ETDA) – an NGO that provides training and guidance in a range of areas – to mitigate the impact of the COVID-19 crisis on women entrepreneurs and employees in the tourism sector. The initiative also aimed to enhance tourism’s contribution to gender equality and women’s empowerment. 

A Tourism and Gender Assessment was conducted in 2022, with the report widely disseminated in the sector to raise awareness about women’s empowerment in tourism. This was followed by a tourism and gender training needs analysis in the same year, which formed the basis for delivering training to trainers from the ETDA and other training institutes. The MTCI and the ETDA provided in-kind support to assist with awareness-raising and training activities, including a training-of-trainers seminar.

During the training, almost 250 women working in the tourism sector learned about topics such as food safety and hygiene, guesthouse management, financial management, digital marketing and basic supervisory skills. Fostering Tourism for Development, a UNWTO publication, reported that both the Government and private sector showed considerable interest in replicating and expanding these vocational training seminars. In view of this, stakeholders made concerted efforts to mobilize resources to deliver the training seminars in other parts of the country and explore ways of adapting the project curricula for high schools and tertiary institutions. 

A model case for inclusive development

Based on its foresight and resolve to reduce its dependence on finite oil and gas resources, Timor-Leste continues its journey towards inclusive development. 

The EIF’s partnership with the Government of Timor-Leste continues to build on past successes, which span skills development for trade policy analysis and negotiations through to on-the-ground initiatives aimed at ensuring economic diversification benefits the country’s population. The capacity built with support of the EIF and other partners has strengthened Timor-Leste’s resilience to shocks and its ability to recover. This resilience, as demonstrated through the successful women’s empowerment, climate, tourism and agricultural initiatives, has bolstered the international community’s confidence in Timor-Leste. Its success can become a model of inclusive development, inspiring other countries in their efforts toward sustainable growth and resilience.