In the 12 years since Timor-Leste won independence it has drawn on foreign assistance and oil revenues to rebuild infrastructure, establish a functioning government apparatus, and invest in education and health services for its young population.
Despite concerns that it could suffer from the “resource curse,” Timor-Leste’s leadership has followed a different path, adopting lessons from other resource-rich countries that prioritize stability and good governance. It established “New Deal” principles for how development partners should engage in the process, and has been careful in the way it leverages financial assistance to make the most of Timor-Leste’s resources while building local capacity and systems.
This strategy is underpinned by the country’s Petroleum Fund, internationally recognized as a best practice example for sovereign wealth funds. With a balance approaching $17 billion, the fund is helping avoid the boom-and-bust cycle that has plagued many other resource-rich countries, and provides ready access to resources to invest in physical infrastructure and human capital.
Stability and savings in hand, the government—with support from development partners—is working toward a 20-year vision. This objective is guided by the Strategic Development Plan 2011-2030, which aims to build a diversified economy that delivers widespread benefits. Within this overall framework, the Asian Development Bank (ADB) has been asked to help coordinate development partners’ support in infrastructure under a Development Policy Coordination Mechanism hosted by the Ministry of Finance.
Steady progress is being made. Over the past few years the government has worked with the private sector to expand the electricity and telecoms systems, which now reach the majority of the population. With financing from ADB, the government is on track to upgrade almost 100km of the national road network by 2015. Much more will follow between 2016 and 2018 with help from ADB, the governments of Australia and Japan, and World Bank Group. Australia is supporting an expansion of rural feeder roads, while Japan is helping develop a master plan for Dili and ADB is financing clean water connections for urban households. And the International Finance Corporation is advising on a public-private partnership for a new port at Tibar Bay.
More can be done to ensure public investments deliver high quality infrastructure that is properly operated and maintained. Know-how and incentives for project management remain scarce, and some projects fail to be tendered competitively and lack proper design or supervisory arrangements. Others may be built at a scale that is too large for current—or even foreseeable—demand. This underscores the need for proper planning, design and implementation. With these the Petroleum Fund won’t be wasted on low quality infrastructure. Further, proper maintenance will ensure assets don’t fall into disrepair, and subsidies for ongoing operation won’t place an ever-increasing burden on finite budget resources.
In many instances Timor-Leste is already applying good practices. The Major Projects Secretariat regularly reviews the economic viability of proposed projects. An ever increasing volume of civil works is being competitively tendered by the National Procurement Commission, including all those financed by loans from major development partners. Certain rural roads are being maintained by local communities under schemes that provide training and other assistance with help from nongovernmental organizations. The Ministry of Public Works recently began piloting a performance-based road maintenance contract that pays a Timorese company on the basis of quality, and is working with the Ministry of Finance’s PPP Unit on options for private sector provision of urban water services and electricity.
ADB is supporting the government with these and other initiatives.
Building on these examples, Timor-Leste and its development partners should step up their collaboration on the next generation of infrastructure. Given the country’s financial resources, the main “value-added” from foreign assistance comes from the knowledge, systems and capacity that accompany it. To ensure an enduring development impact, infrastructure financing must come with support for policy reform, multi-year planning, sound project management and lessons from other countries. Skills and capacity development are also absolutely essential. ADB is committed to continue working with the government and other partners—and through the Development Policy Coordination Mechanism—to achieve these goals.
Stephen P. Groff is the Asian Development Bank’s Vice-President for East Asia, Southeast Asia and the Pacific. Follow him on Twitter @spgroff.