Regions and Countries

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p. 26 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Central Asian republics, Azerbaijan and Mongolia People’s Republic of China Southeast Asia Cambodia Indonesia Lao People’s Democratic Republic Malaysia Myanmar Philippines Thailand Viet Nam East Timor South Asia The Pacific

East Timor

East Timor, occupying the eastern part of the island of Timor, is situated between Australia and Indonesia.

Following a referendum in August 1999, East Timor was placed under the supervision of the United Nations. On 9 December 1999, a Trust Fund for East Timor (TFET) was established with the assistance of funding agencies. The TFET grant projects are formulated and supervised by ADB and the World Bank.

Economic performance

The economy was severely affected by the violence and destruction that followed the referendum, with some estimates indicating a 40 percent decline in real gross domestic product (GDP) in 1999. Public and private property was damaged, the agricultural cycle and trade were disrupted, and a substantial part of infrastructure was destroyed. Low cash activities; low demand; and lack of capital, infrastructure, and a transport system constrain the economy. Unemployment is high and humanitarian assistance continues to be an important source of support for a sizable part of the population.

As conditions in the country gradually returned to normal, the economy rebounded. Given the low base, real GDP growth was estimated at 15 percent in 2000, largely as a result of reconstruction work and the gradual restoration of commerce, business, and basic services. Because of favorable weather, the output of maize, rice, and coffee (the major export commodity) also improved in 2000. Inflation slowed, along with reduced regional disparities in staple food prices. The recovery process is expected to gather momentum and be led by agriculture, construction, and services; prices are expected to stabilize in the coming years. The combined sources budget of East Timor for FY2001 (ending 30 June) provides for a total revenue of $25.1 million and total expenditure, including net lending, of $183.0 million. The overall deficit of $157.9 million (about 55 percent of GDP) will be financed largely from external grants.

In 2000, the National Consultative Council adopted the US dollar as the legal tender, although the Indonesian rupiah continued to be used. The Central Payments Office began providing basic depository and payment services. Several regulations related to banking and the payments system were enacted. The Central Fiscal Authority has also started revenue and budgetary functions. The Department of Economic Affairs and the National Planning and Development Agency were created.

ADB operations

ADB’s strategy for East Timor during the transition period focuses on supporting the reconstruction and development of the economy. Capacity building at various levels among East Timorese continues to be a priority. ADB is also helping reduce poverty and improving the quality of basic services through its TFET grant projects.

East Timor is not yet a member of ADB and is not eligible for loans. However, ADB’s Board of Directors made East Timor eligible for technical assistance grants primarily for capacity building. In 2000, ADB approved 12 technical assistance grants totaling $4.9 million. Also in 2000, ADB established its Special Liaison Office in East Timor.

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