Country Report Timor-Leste January 2009

Outlook for 2009-10

Despite the relative calm that has prevailed in recent months, politics in Timor-Leste will remain problematic in 2009-10. Although the government has sought to play down the threat of another military insurrection or renewed conflict between the military and the police, the implementation of planned security reforms could prove to be difficult. Owing to its slim parliamentary majority, the coalition government remains in a precarious position and could struggle to pass vital legislation. In the budget for 2009 the government again intends to withdraw from the Petroleum Fund an amount that is in excess of the "estimated sustainable income" level. It has justified its budget plans on the basis that it needs to spend heavily on developing the country's infrastructure. For the non-oil economy, the main growth stimulus in 2009-10 is expected to come from government expenditure.

The political scene

The country has enjoyed a relatively high level of peace and security in the past few months after a turbulent couple of years, but there are concerns that underlying tensions remain. In December the government issued a statement firmly rejecting suggestions in a leaked confidential report by UN officials that the country could revert to anarchy because that the country's police and judicial systems were dysfunctional. Despite the improvements in security, relations between the government and the opposition, Frente Revolucionaria do Timor-Leste Independente (Fretilin, Revolutionary Front for an Independent Timor-Leste), remain fragile. In the final few months of 2008 Fretilin's leader, Mari Alkatiri, threatened to hold large-scale anti-government protests. Timor-Leste has received the support of a number of members of the Association of South-East Asian Nations (ASEAN) in its efforts to join the group.

Economic policy and the economy

The government suffered a major setback in November when the Court of Appeal ruled against the constitutionality and legality of the government's 2008 mid-year budget, which pushed planned spending for the year up to US$788m, from US$347.8m in the original budget. The government's fiscal performance in the first nine months of 2008 was not overly impressive, as domestic revenue was below the pro-rata target and expenditure slightly above target. Although consumer prices contracted slightly in September (the latest month for which data are available), year-on-year inflation remained high, at 12%. Although there is a lack of timely and comprehensive data on Timor-Leste's economy, banking sector data provide some indication of sluggish growth.

This report covers the following industry codes:
SIC Code: 53
NAICS Code: 44

This report covers the following industry codes:
SIC Code: 53
NAICS Code: 44