[While] Timor-Leste has made substantial progress in the twelve years since independence, the benefits of economic growth have been spread unevenly and poverty remains widespread. Most people live in rural areas and are engaged in subsistence farming, with very limited job prospects and without viable incomes. The economy is heavily dependent on government spending, with little private sector growth outside construction. The weak private sector creates few jobs, and is constrained by poor infrastructure, relatively high costs of doing business, difficulties in securing bank loans and skills shortages. Most young people are neither in employment nor gaining the education and skills needed to take up the few available jobs. A lack of income-generating skills and opportunities and a weak environment for private sector development are major constraints to sustainable growth. Australia seeks to help diversify Timor-Leste’s economy by increasing agricultural productivity and marketability, and paving the way to employment opportunities outside agriculture.
—Aid Investment Plan, Timor-Leste, 2015–16 to 2018–19 (DFAT)
Timor-Leste is one of the poorest countries in the region, but hopes to become an upper middle income country by 2030. Australia has been its largest development partner since Timor-Leste achieved independence in 2002.
Timor-Leste has enjoyed a fast-growing economy and its longest period of stability since independence. The country must overcome considerable economic obstacles. The rate of population growth is too high, and revenues are narrowly based on oil and gas. Timor-Leste is one of the most oil-dependent countries in the world; oil and gas revenues account for 70% of GDP and almost 90% of total government revenue between 2010 and 2015. Doing business remains difficult; the World Bank placed Timor-Leste 173 out of 189 in its 2016 ease of doing business rankings.
Two-thirds of its 1.17 million population live on less than US$2 a day. Most of the population live in rural areas and rely on subsistence agriculture with little or no access to markets. Most rural households are on the edge of the cash economy; each person produces a median value US$378 of farm product a year, but only sells US$41/household/year.
Four in ten Timorese live below the national poverty line. The private sector faces difficulties including accessing finance, a low-skilled workforce and poor infrastructure. The maternal mortality rate is one of the highest in the region. While school enrolment has improved, learning outcomes remain poor. Many women are poorly educated and do not work, and there are high rates of gender-based violence. Nutrition remains a major concern with high rates of stunting in children under five years (50%). Making more animal-sourced food available and reducing micronutrient deficiencies would solve this problem. This shows the need to diversify crops and to increase farmers’ cash income to purchase off-farm products.
Timor-Leste and Australia have a close relationship based on nearness, history and personal associations. Australia has been at the forefront of international support for Timor-Leste since its independence in 2002; it is the largest bilateral donor of development assistance, and has been a leader in ensuring the country is secure and stable.
ACIAR’s research agenda supports Timor-Leste’s Strategic Development Plan 2011–30, which sets out a clear development agenda. Timor-Leste is developing a new forward-looking country strategy with Australia. The agreed medium-term research priorities are to:
- improve smallholder and community livelihoods through adopting improved varieties of staple crops and legumes
- make livestock, fisheries and horticultural systems more productive and resilient
- improve individual and institutional research and development (R&D) capacity in the Ministry of Agriculture and Fisheries and University of Timor Lorosa’e.