Summary  of  the  first  Public  Policy  Discussion  

on  Foreign  Direct  Investment  

 

Foreign   Direct   Investment   is   an   important   component   of   today's   world   economic  development.   It   is   also   an   important   aspect   of   economic   integration   and   globalization.  Several  sources  indicate  that  the  flow  of  investment  from  one  country  to  another  has  been  increasing  since  the  Second  World  War.  At  the  same  time,  as  a  new  country,  Timor-­‐Leste  is  looking   for   the   means   to   attract   foreign   investment   which   could   provide   the   capital   for  

Timor-­‐Leste’s   current   development.   The   recent   discussion   on   Public-­‐Private   Partnerships  indicates  the  seriousness  of  the  Timorese  Government  regarding  this  matter.    

At   the   same   time,   the   Research   and   Analysis   department,   on   behalf   of   the   President's  Office,  has  initiated  a  discussion  on  this  same  topic.  Keynote  speakers  at  this  event  were  the  Minister   of   Trade,   Industry   and   Environment,   Antonio   da   Conceição,   World   Bank   Senior  Economist,   Hans   Beck,   and   economic   development   researcher   of   the   Department   of  

Research   and   Analysis   of   the   President's   Office,   Guteriano   Neves.   The   discussion   was  moderated  by  the  Chief  of  the  Civil  House,  Fidelis  Magalhães.    

According  to  the  Minister  of  Trade,  Industry  and  Environment,  Antonio  da  Conceição,  Timor-­‐Leste’s   potential   investment   areas   include:   natural   resources,   agriculture  with   a   focus   on  agro-­‐industry,   petroleum   industry   on   the   south   coast,   tourism,   fisheries   and   forestry.  According  to  Antonio  da  Conceição,  these  sectors  have  the  potential  to  grow  in  Timor-­‐Leste.  In   this   context,   the   National   Development   Strategic   Plan   guides   the   whole   development  

process.  As  far  as  the  legal  framework  is  concerned,  apart  from  the  Constitution  itself,  the  Investment  Law,  which  was  promulgated  in  2011,  regulates  and  defines   important  aspects  of   foreign   investment,   such   as   the   minimum   required   level   of   investment,   the   right   to  import  and  export,  equal  treatment  and  leasing  of  state  property  (e.g.  land).    

In  his  presentation,  World  Bank  representative  Hans  Beck  explored  the  general  conditions  for  foreign  investment  around  the  world  and  the  definition  of  foreign  investment.  According  

to  him,  the  decisive  conditions  to  attract  foreign  investment  are  the  image  and  reputation  of  each  country,  an  attractive  environment  for  investment,  an  efficient  national  investment  framework   and   a   good   and   pro-­‐active   coordination   between   public   institutions   which  promotes   investment.   Based   on   the   global   context,   some   sources   indicate   that   the  proximity  to  the  market  and  the  potential  of   the  domestic  market   for  growth  are  the  two  

aspects  that  most  attract  investors.  At  the  same  time,  the  option  of  investors  for  a  certain  location/country  depends  also  on  the  type  of  investment  they  want  to  make.    

Guteriano   Neves,   of   the   Research   and   Analysis   Department,   focused   his   presentation   on  Timor-­‐Leste’s   challenges   and   opportunities.   According   to   the   investors,   the   challenges  

include  law  and  the  judicial  system,  the  lack  of  efficiency  in  terms  of  bureaucracy  in  public  institutions,   basic   infrastructures,   the   qualifications   of   the   workers,   the   taxation   policy,  inflation,   small   market   and   promotion.   At   the   same   time,   Timor   offers   a   series   of  

opportunities,   including:   its   geographical   positioning  between   two  major   countries   and   in  Asia,  the  latter  going  through  a  period  of  prosperous  economic  development;  the  national  demographic   rates;   and   the   increasing   sense   of   confidence   in   the   political   system   and  domestic  market.  In  this  context,  it  is  important  for  Timor  to  strategically  reflect  on  how  to  explore  these  opportunities.    

During   the  discussion,   several   participants   raised  questions   regarding  basic   infrastructure,  

institutional  and  legal  frameworks,  the  qualification  of  the  workers,  the  banking  system,  the  production   capacity,   and   the   lack  of  efficiency  of  public   institutions  etc.   Furthermore,   the  lack   of   clarity   of   the  Government’s   economic   policy,   the   reduced   implementation  of   laws  and  the  lack  of  pro-­‐activity  of  the  Government  were  also  pointed  out  as  contributors  to  the  aforementioned   problems   and   obstacles   to   investors.   Among   the   recommendations  

presented  by  the  participants  were  the  focus  on  small  industries,  the  investment  on  human  capital  with  a  view  to  HR  capacity  in  Timor,  and  the  development  of,  and  capacity-­‐building  for,  public  institutions.  As  far  as  the  tourism  sector  is  concerned,  participants  suggested  the  development  of  a  style  of  tourism  that  cannot  be  found   in  Bali,  Singapore,  Australia,  or   in  other  Asian  countries.    

This   inaugural   event   had   a   high   participation   rate,   with   participants   giving   valuable  contribution  with   ideas  and  questions.  The   ideas  gathered   in  discussions   like   this  are  very  

important   to   the   design   of   policies   based   on   facts   and   to   the   comprehensive   analysis   of  these   facts.   This   is   an   important  aspect  of   the  President  of   the  Republic’s   strategy,  which  supports   the   idea   that   policies   must   be   developed   based   on   comprehensive   studies   and  analyses  of  Timor-­‐Leste’s  situation.  These  ideas  are  the  starting  point  for  the  Government  to  

develop   policies   and   for   the   Presidency   to   approach   and   work   together   with   the  Government  in  this  critical  process.