Investing in Timor-Leste
A foreign investment law (https://www.laohamutuk.org/econ/invest/Law14-2011en.pdf) was passed by the Timor-Lesteese Parliament in 2011, which aims to simplify business registration for foreign investors. The government established a Registry and Verification of Enterprises Service SERVE (http://www.serve.gov.tl/pt), for one-stop registration of businesses. It has also been created an agency to promote foreign investment and assist investors called TradeInvest Timor-Leste (http://www.investtimor-leste.com/).
Furthermore, Timor-Leste has been seeking to build infrastructure to support the economic activity, such as the construction of two power plant units in the energy sector; the upgrading of its international airport and of some regional airports in the airport sector; the upgrading of its road network systems in the road infrastructure sector; the extending access to safe water, and water and sanitation projects.
It should be noted two big structural projects that may have a significant impact in the economy and represent a strong opportunity to companies: i) the Tasi Mane project, which provides for the implementation of an industrial zone of around 800 hectare for the setting up of companies to support the development of the petrol industry, thus creating a manufacturing and logistic hub, and the ii) Tibar Bay Port Project, to be concluded in 2017, enabling Timor-Leste to serve a region’s market platform (as it allows the movement of large or small vessels, with a logistical support area).
This law aimed at simplifying the registration of companies to foreign investors.
a. Investment or re-investment can consist of the following:
- Incorporation of a company under the terms of the applicable law of the Country;
- Acquisition of part or all the shares of a company or participation in the increase of its capital;
- Entering into or amending consortium agreements, partnerships, joint ventures or any other form of permissible contract of association, even if not set out in the applicable law of the Country;
- Entering into or amending agreements involving the property or the management of companies, establishments of an agricultural, industrial or commercial nature, real estate compounds and other installations or facilities geared to the development of economic activities;
- Loans taken out or supplementary inputs of capital made by an investor vis-à-vis a company in which such investor has shares, or any loans related to re-investment in the company or participation in profits;
- Purchase, leasing or acquisition of any other rights in rem over property on national territory, when the acquisition is part of a private investment project, in compliance with the applicable legislation of the Country.
Exceptions to Free Investment Initiative: All developments geared to the commercialization of property; Developments geared to the direct sale of goods and equipment to the final consumer; Prospection, research and production of oil and natural gas, as well as the mining industry of mineral resources, both the object of specific legislation.
b. Criteria:
– a minimum amount of US$50,000, for national resident investors, the percentage of which invested in cash shall be at least 10% of the total value of the investment or re-investment;
– a minimum amount of US$1,500,000, for foreign or national non-resident investors, the percentage of which invested in cash shall be at least 50% of the total value of the investment or re-investment;
– in the event of contracts of association between foreign investors and national residents, where the national residents control at least 75% of the shares with voting rights of the companies involved, the minimum value of the investment or re-investment shall, for the purpose of access to benefits and incentives, be of US$750,000.
c. Rights and Guarantees:
Some of the benefits and incentives established are:
(i) right to freely transfer funds abroad; (ii) right to employ foreign workers and the right for non-resident foreign or national workers to freely transfer abroad their net income resulting from their labour agreement; (iii) exemption from income tax to the value of 100% for a period of 5 to 10 years; (iv) exemption from income tax up to 100% of expenses incurred with the vocational training of permanent Timorese workers; (v) exemption from customs import duty to the value of 100% in relation to all capital goods and equipment used in the construction or management of the investment or re-investment project, for a period of 5 to 10 years; and (vi) possibility of a lease agreement concerning property belonging to the State for a maximum time period of fifty years, renewable once for an equal period of time.
- Other relevant information:
a. Existing Banks:
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b. Investment opportunities:
There are sectors that constitute relevant opportunities in the Timorese economy, namely, agriculture, tourism, oil and natural gas, infrastructure and ICT sectors.
Water and sanitation facilities:  |
| One of the sectors with potential development is water and sanitation facilities, where several projects are already provided.
The company Águas de Portugal (Portugal’s national Water company) reactivated the invested company in Timor-Leste in order to support the infrastructure development, namely regarding water and sanitation facilities. The reactivation of the company’s mains purpose is the service provision in the areas of water supply, waste water and waste disposal. In this way, it intends to tackle the weaknesses of the sector related to cruel lack of access to drinking water and purification services, especially for drainage, sanitation and solid-waste management. |
Agriculture |
| Agriculture is another sector with potential development. Several investments have been made concerning, among others, farming structures and infrastructure and agricultural inputs, including fertilizers and seeds. It is an opportunity for moving from subsistence agriculture to a corporate or commercial production agriculture (including agricultural products, livestock and fisheries). However, there is a number of needs to be addressed:
– level of training of workforce; – Development of irrigations systems; – Distribution and logistics network; – Transport systems’ capacity for agricultural products; – Adjustment to the needs of the local populations. Besides the oil, coffee remains one of the main products to be exported from Timor-Leste and with a strong capacity to penetrate in ASEAN market. |
Tourism  |
| Tourism has a considerable potential for Timor Leste’s economic development. This sector is still at a very early stage of its development.
It is an opportunity sector largely due to the location of Timor-Leste in the Asia Pacific region, and it is a market that is expanding. There are some constraints for the development of the sector namely related to the existing infrastructures and facilities (road networks and very little option for accommodation supply). |
Oil & Gas  |
| Oil and gas is a fundamental pillar of the Timorese economy. Oil is one of the most important natural resources of the economy, being also the most significant source of income of the general state budget. It is a sector that can increase employment creation.
Besides oil, a LNG plant to process the gas will be built in a cluster that will incorporate the LNG Plant Complex as well as a marine facility to enable unloading of materials during construction and loading of LNG products during operation in the South coast. This might provide opportunities for construction companies and natural gas undertakings. |
Infrastructures  |
| The project Tasi Mane stands out in this sector, and enables the creation of several industrial poles in the South coast of Timor-Leste bearing in mind the development of the coastal zone of Suai and Beaço. Thus, it will help to create a domestic oil industry. It also covers the Suai’ supply hub, the Refinery and Petrochemical Industry hub of Betano and the LPG Plant Complex of Beaço.
The airport requalification works also distinguish themselves, namely the international airport, road network improvement and construction works, namely the construction works of Tibar Bay Port Project, which can serve in 2017 as a commercial trading post for the ASEAN. |
ICT  |
| The market opening for the granting of communication licenses in Timor-Leste in 2017, the modernisation of the communication network, the government’s intention to assign a laptop computer to each student and health worker, as well as the creation of training contents on education and health might provide short-term opportunities for companies. |
More opportunities  |
| Considering the state of development of the country, and once confirmed the possibility of exploration of new oil and gas reserves, it is expectable an increase of the Timorese’s GDP per capita, who will have more of their income available. It can create new opportunities, namely in :
– Building and housing; – Construction and improvement of new roads and access, partly related to road-infrastructure development, including road signs; – Education and professional training – through the development of competences on the various levels of training and associated with education programmes funded by financial institutions that support the development; – support for development and training of civil servants; – support for development of public bodies and its infrastructures, namely in the health, security force, military, justice, social security and finance sectors. – development of local industries that support strategic sectors of development: cement, bricks, paintings, electrical appliances, construction machinery, material transportation vehicles, etc. – development of food distribution network; – development of transport of goods companies; – service companies aimed for the sectors of: oil&gas, construction and training. |