2023 Investment Climate Statements: Timor-Leste

Policies Towards Foreign Direct Investment

Timor-Leste welcomes and strives to attract Foreign Direct Investment (FDI). The government has made considerable effort to establish effective legislative, executive, and judicial institutions, draft laws and regulations, and build personnel capacity. In 2011, parliament unanimously approved the government’s National Strategic Development Plan. The plan directs petroleum revenues to support non-petroleum economic development and help the country move to become a middle-income country by 2030. Despite its openness to FDI and efforts to improve the enabling environment, Timor-Leste’s legal, regulatory, and human capacity remain weak and continue to present challenges for investors.

TradeInvest Timor-Leste, I.P. is Timor-Leste’s investment and export promotion agency. The organization’s goal is to facilitate and support potential investors in the country and assist foreign companies in identifying projects among the limited business opportunities emerging in Timor-Leste. TradeInvest is a one-stop-shop that provides services such as licensing, taxes, investment opportunities, permits, tariffs, and educating importers on correct procedures and policies. TradeInvest also provides post-investment aftercare services. The agency’s official website is www.tradeinvest.tl .

The government has no regular structures or activities intended to maintain engagement with investors.

There are no laws or practices in the country that U.S. investors allege discriminate against foreign investors by prohibiting, limiting, or conditioning foreign investment in a sector of the economy. However, under the constitution, only citizens may own land. Timor-Leste enacted laws in 2017 and 2018 to facilitate and protect foreign private investment by adhering to international agreements and reducing bureaucratic hurdles. Private Investment Law No. 15/2017 states that foreigners can be granted the right to private property for investment and reinvestment projects subject to the limits set out in the Constitution and in legislation on land and commercial companies.

The government views building international ties as part of its effort to increase foreign direct investment opportunities. In 2022 ASEAN member states granted Timor-Leste observer status and agreed in principle to approve its application for ASEAN member ship. Timor-Leste has been active in the Community of Portuguese Speaking Countries and served as President from 2014-2016. (A Timorese citizen has served as Executive Secretary of the Community of Portuguese Speaking Countries since July 2021.) Timor-Leste is also pursuing WTO accession, and also pursuing trilateral economic cooperation opportunities with Indonesia and Australia to boost cross-country investment.

The government’s Strategic Development Plan highlights key investment areas to include oil and gas, forestry and livestock, fisheries, tourism, energy, infrastructure, civil construction, coffee, spices, and transportation.

The government, through its autonomous agency, the National Petroleum and Minerals Authority (ANPM), contracts with foreign firms to explore and develop offshore oil and gas deposits. Pre-qualification for Timor-Leste’s second licensing round of 11 onshore and 7 offshore blocks closed on January 14, 2022. Thirteen companies submitted bid documents. Bid results were announced April 22, 2022, with five blocks awarded. ANPM has also hosted annual Oil, Gas, and Energy Summits for four years to attract international investors to the oil and gas industry in Timor-Leste, collectively drawing virtual and in-person attendance from over 350 participants from nearly 225 companies. The 2022 summit was held in Dili in June.

The government deposits oil and gas revenues into the Petroleum Fund, a sovereign wealth fund. Investment income represents the majority of fund income with revenues from oil and gas currently a relatively small share of income. Strong recovery of global oil prices in 2021, however, reaching historic highs in early 2022 has bolstered revenue from depleting production. The fund value has experienced considerable fluctuation as the COVID-19 pandemic impacted global financial markets. Government expenditures, including efforts to combat COVID-19, rely heavily on the fund. Business and individual tax collections comprise less than 10% of GOTL operating revenues.

Government spending, coffee exports, subsistence agriculture, remittances from workers abroad, and small-scale retail activities are the other sources of employment and economic drivers. On March 21, 2023, the Government of Timor-Leste, through the National Petroleum and Minerals Authority (ANPM), launched its first licensing round for mineral exploration, offering a total of 49 concession areas for investment. No mineral extraction currently takes place in the country.

Limits on Foreign Control and Right to Private Ownership and Establishment

By law, foreign investors may invest in any sector other than postal services, public communications, transportation, protected natural areas, funeral services, and weapons production and distribution, as these are specifically reserved for the state. Investors are also prohibited from investing in sectors otherwise restricted by law. In areas where foreign investment is permitted there are no limits on the level of foreign ownership or control. There have been no changes to the legal regime in the past year. However, in practice, foreign companies have significant holdings in reserved sectors. For example, Brazilian, Indonesian, Vietnamese, and Chinese investors control large shares of the country’s three telecommunications providers.

Section 54 of Timor-Leste’s constitution grants the right of land ownership exclusively to Timorese nationals, either individuals or corporate entities; however, foreigners may conclude long-term (up to 50-year) leases. Investors who wish to lease property must often sort through competing claims from the Portuguese colonial administration, the Indonesian occupation era, and the post-independence period. Resolution may be delayed for years.

TradeInvest reviews foreign investment applications which are then presented to the Private Investment Commission for further study and evaluation. The Executive Director of TradeInvest chairs the Private Investment Commission, which is composed of directors general or equivalent from the relevant government ministries in the areas of taxation, customs, land and properties, economic activities of licensing, professional training, labor, immigration, building and housing, territorial planning, and the environment. Other ad-hoc members may also be called upon to be present during the meeting. Prospective investments are reviewed for their economic cost and benefits as well as for the capacity of the investor.

The Private Investment Commission evaluates applications for foreign investment permits, verifying the following:

• Compliance of the application with requirements established in the National Development Plan, in the Procedural Regulation for Foreign Investment and other applicable legislation.
• Suitability, capacity, experience, and availability of financial resources necessary for implementation and operation of the proposed investment enterprise.
• Capacity, experience, and business or technical characteristics of the promoter or its managers in order to guarantee implementation and operation of the enterprise.
• Positive operational balance of the business, according to the project proposal.
• Environmental, infrastructural, and social implications which could condition the viability of the enterprise or that can result from its implementation.
• Guaranteeing availability of necessary land for installation and functioning of the investment enterprise.
• Ensuring consistency of the expected new jobs to be created in the short and medium term.
• Establishing interconnection with other economic sectors.

The documents required for investments include:

• TradeInvest application form
• Descriptive project summary (project briefs, technical plans)
• Identification of promoters, professional CV/Firm Corporate Capability
• Bank credentials (bank statement, bank reference)
• Business plan
• Documents of Land Ownership
• Lot location
• Budget for construction/remodeling
• Environmental Impact Assessment (Environmental Licensing)
• Criminal Records (Original/Certified copy)

TradeInvest can issue a certificate of investment for projects approved by the Private Investment Commission valued at less than $20 million. Investments of more than $20 million or that require more than 5 hectares of state land for tourism or 100 hectares of state land for agriculture, livestock, or forestry require approval from the Council of Ministers. Investors can also request a Special Investment Agreement, through TradeInvest, prior to submitting the project to the Council of Ministers for approval. The TradeInvest website reports that application fees are $500 for national investors and $2,000 for international investors. TradeInvest should issue investment decisions within 30 days. Regulatory actions needing approval from the Council of Ministers may require additional time to resolve.

After nearly a decade, the government granted a foreign company the rights to invest an initial $100 million to develop 16 hectares into an upscale resort just west of the capital in March 2020. In January 2022, the Council of Ministers approved a Special Investment Agreement (SIA) for the development that had been pending since 2010. Timor Port, a $490 million project developed as the country’s first Public Private Partnership was completed and began operating in September 2022. Another multi-million-dollar large-scale investments in a cement plant in Baucau is yet to open, having been delayed by COVID-19 and opaque government processes.

Other Investment Policy Reviews

Timor-Leste has not yet conducted any investment policy reviews through OECD, WTO, or UNCTAD. Timor-Leste was accepted as an observer to the WTO in 2016, and its Working Party for accession to the WTO was established in December 2016 and held meeting in October 2020, July 2021, April 2022, and September 2022. In May of 2022, the Coordinating Minister for Economic Affairs and WTO Accession Chief Negotiator led a large government delegation in bilateral meetings with WTO members, the WTO Secretariat and development partners in Geneva. Timor-Leste’s overall political stability has allowed some businesses to grow; political impasses, during which the country operated without state budgets, however, reduced opportunities for government contracts in 2017, 2018, and 2020. The political impasses affected many areas of the economy, including commerce, public services, and larger public works projects. The government passed its 2021, 2022, and 2023 state budgets on time in December prior to the start of the respective fiscal year (January – December).

In March 2020, the government enacted a State of Emergency (SOE) to respond to the COVID-19 pandemic and restricted many “non-essential” commercial enterprises. In November 2021, the government passed amendments to the Health Law that allowed it to implement public health measures previously only possible under an SOE, and the last SOE expired. In August 2020, the government released a plan to promote Timor-Leste’s post-COVID-19 economic recovery, including short-, medium-, and long-term interventions. The plan includes support to the private sector as well as to households and local producers. The food subsidy program (Cesta Básica) introduced with the plan continued to be implemented with the 2023 state budget.

Although the government is committed to improving its services in critical sectors, challenges remain – bureaucratic inefficiency, infrastructure bottlenecks, the absence of real property and information communications technology (ICT) laws and other essential legislation, a lack of commercial courts, uncertain implementation of government procedures, significant deficiencies in human capacity, conflicts of interest, and corruption are some of the most notable challenges.

Civil Society

Timor-Leste has not been the subject of investment policy reviews by domestic or third country civil society groups.

Business Facilitation

Timor-Leste’s Business Verification and Registration Service office (SERVE) processes business registration and licensing in the country. SERVE was created in 2013 as one-stop-shop to make business registration faster and easier. The agency’s website is https://serve.gov.tl . Business registration and application processes require an in-person visit to SERVE’s office. Getting a business license takes between one and five days; however, actual timelines may be greater. For companies involved in civil construction, food processing, or pharmaceutical industries, the agency works closely with relevant ministries, particularly the Ministry of Tourism, Commerce, and Industry, to facilitate business licenses, although since 2017 all registration requirements have been centralized with SERVE.

Monthly and annual tax declarations can be made online at https://attl.gov.tl/ .

Outward Investment

The government does not promote or incentivize outward investment, nor does it restrict it.

Transparency of the Regulatory System

Timor-Leste’s regulatory system is still in formative stages. Existing tax, labor, environment, health and safety, and other laws and policies do not present obvious impediments to investment. Government policies and practices generally are transparent.

The Ministry of Finance launched an online Procurement Portal in 2011, intended to increase transparency by providing equal access to information on government tenders and procurement contracts. However, updates are inconsistent and not all tenders appear to be included in the site. Reports say when tenders are posted, it is only for a few days and winners may be pre-selected. The Audit Chamber, under the Court of Appeals, is responsible for reviewing government procurements above $5 million.

In 2018 and 2019, the Ministry of Finance launched the ASYCUDA system in APORTIL, the organization managing customs at the international port and International Airport of Nicolao Lobato, as part of the fiscal reform process with the aim of improving efficiency, customer service, and transparency. The government hopes to facilitate trade by implementing a modern and reliable system to track and manage imports and exports. USAID’s Customs Reform Project helped Timor-Leste’s Customs Authority to streamline processes, improve government-wide integration, and align with laws and international standards. The project also established a National Customs Hotline for reporting illegal activities and an online Customs Trade portal providing the public with trade-related information, improving transparency for import/export procedures. In May 2021, Timor-Leste’s Customs Authority launched a Customs Hotline, allowing anyone to anonymously report by phone or online possible customs infractions. This and similar international programming help the GOTL reduce trade costs by adopting best-practice customs clearance and transit procedures.

In addition, SERVE issues no-cost business licenses for what it determines to be low-risk undertakings. High- and medium-risk business licenses may incur application fees. Initial and renewal business license are generally valid for 12 months. SERVE also supports the private sector’s compliance with mandatory social security contribution laws.

Parliament and parliamentary committees regularly hold hearings and debates on proposed laws. For certain major legislation, the government holds limited public consultations or solicits public comment. Public health protocols reduced public consultations during the COVID-19 pandemic, but with a gradual lifting of restrictions following expiration of the last state of emergency in November 2021 public consultation activity returned to normal by Q1 2023. There is no legal requirement to publish draft regulations prior to enactment. Relevant functional agencies generally are responsible for formulating regulations, which are then presented by the parent Ministry for consideration and approval by the Council of Ministers.

Regulations are adopted and implemented at the national level; there are no sub-national levels of regulation. Most oversight occurs in the capital by relevant ministries, although some agencies have staff at the district level that monitor compliance. Legislation and regulations are published in the national journal (Jornal da República de Timor-Leste, www.mj.gov.tl/jornal/ ), in full text, to signify entry into force, although applicable information may be tardily printed or difficult to find.

Public finances and debt obligations are published and available to the public. Financial reports available through internet-based access are not consistently updated, but they are generally made available upon request.

Government encourages businesses to engage in good corporate social responsibility practices, although this effort is only codified in the oil and gas sector. The Petroleum Act of 2005 includes a local content regulation that requires applicants for production sharing contracts to include proposals for environmental protection, health and safety, and training and preferential employment of Timor-Leste nationals.

International Regulatory Considerations

Reforms currently underway in Timor-Leste’s fiscal and economic systems aim to bring the country into compliance with ASEAN and WTO standards. The Timor-Leste ASEAN Mobilization Plan (TLAMP) aims to bring all the relevant line ministries into compliance with ASEAN economic best practices.

Timor-Leste was accepted as an observer to the WTO in 2016, and its Working Party for accession was established in December 2016. The fourth meeting of the Working Party was held in September 2022. A Timor-Leste government delegation visited Geneva in May 2022 for bilateral meetings with WTO members and the WTO Secretariat and participated in roundtable discussions on the country’s WTO accession.

Legal System and Judicial Independence

The Portuguese legal system heavily influences Timor-Leste’s civil law system. Timor-Leste applies Indonesian law, which was in force until August 1999, as a subsidiary source of law for issues not yet addressed in Timorese legislation. The country does not have a written commercial code. The judicial system operates independently of the executive but is evolving and short staffed. Regulations and enforcement actions can be appealed to the court system.

The Office of the Prosecutor General continues to accumulate experience and capacity to establish and implement case management and other essential systems. Timor-Leste has courts of first instance and a court of appeal. However, courts operate in only four of the country’s thirteen districts, and customary law governs most cases at the local level. Additional courts outlined in the Constitution and law, such as specialized tax courts, have not yet been established. Waiting times to bring a case before a judge remain long, and cases may be unresolved for years. Conciliation and arbitration judicial reforms to reduce pending caseloads are preliminary. In practice, the system generally prioritizes criminal cases.

Laws and Regulations on Foreign Direct Investment

The Timorese legal system is based on a mix of Indonesian laws and regulations, acts passed by the United Nations Transitional Administration, and post-independence Timorese legislation modeled on Portuguese civil law. The country is reviewing its legislation to harmonize the system but has yet to undergo a comprehensive overhaul of the overlapping yet disparate systems. Timor-Leste has two official languages (Tetum and Portuguese) and two working languages (Indonesian and English); all new legislation is enacted in Portuguese and is based on the civil law tradition, though is supposed to be published in Tetum as well.

The Private Investment Law (Law No. 15/2017) specifies the conditions and incentives for both domestic and foreign investment and guarantees full equality before the law for international investors. Other major laws affecting incoming foreign investment include the Companies Code of 2004, the Commercial Registration Code, the Taxation Act of 2008, and the Copyright Law of 2022. The Government of Timor-Leste announced the establishment of TradeInvest, a one-stop-shop for investment and export promotion in 2015 ( https://www.tradeinvest.tl/ ). The agency has the responsibility to promote Timorese exports and investment opportunities in the country and to encourage domestic entrepreneurship. There are ongoing fiscal reform efforts designed to align Timorese legislation and regulation with best practices in ASEAN (under the ASEAN Comprehensive Investment Agreement) and under the United Nations Conference on Trade and Development (UNCTAD).

Competition and Antitrust Laws

Timor-Leste does not have a competition or anti-trust law.

Expropriation and Compensation

Both Article 54 of the Constitution and the Private Investment Law permit the expropriation or requisition of private property in the public interest only if just proper compensation is paid to the investor. The Private Investment Law calls for the equal treatment of foreign and national investors in expropriation cases and prohibits nationalization policies or land policies that deliberately target the property of investors.

The government has relocated significant numbers of residents for large development projects in Oecusse and Suai. Two known private investments in Dili have negotiated with the government to remove residents as part of the investment agreement. Residential relocations can often be contentious; a large-scale hospitality development close to the capital is a cautionary example of unregistered tenets establishing domiciles on claimed property of a private investor and demanding compensation from the corporation or government before vacating, and all parties are outwardly refusing to relocate, compensate, or compromise. The government has not used methods that could be considered indirect expropriation. The government has at times been accused of not offering fair market value as compensation for expropriations, or for not following due process for evictions of squatters on government or disputed land.

Dispute Settlement

ICSID Convention and New York Convention

Timor-Leste is a member state to the International Centre for Settlement of Investment Disputes (ICSID Convention). In February 2021, parliament ratified the convention of the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). Law No 6/2021, of March 31, 2021, approved the legal framework for voluntary arbitration. The new regime applies to all arbitration proceedings based in Timor-Leste, whether domestic or international, as well as the confirmation and enforcement of arbitral awards rendered in another country, without prejudice to the provisions of international conventions. The Voluntary Arbitration Acts follows the systematic structure and principles of the UNCITRAL Model Law on International Commercial Arbitration of 1985, as amended in 2006, and entered into force the day after its publication.

Investor-State Dispute Settlement

The domestic court system handles civil disputes but is not properly equipped for the demands currently placed upon it. The Timorese justice system suffers from a shortage of qualified judges and attorneys, incomplete and piecemeal national legislation, and insufficient geographical coverage. New legislation is enacted in Portuguese, while many legislators, prosecutors, judges, attorneys, police officers, plaintiffs, and defendants do not speak the language. Legal professionals lack specialized technical expertise to address complicated commercial or tax cases. Local courts recognize foreign arbitral awards against the government. Timor-Leste is not signatory to any treaties or investment agreements that provide for binding arbitration of investment disputes. There is no history of extrajudicial action against investors.

The government pursued international arbitration against at least one private company in a tax dispute. There were four cases filed against the company in Singapore in arbitration in 2014. After more than a year of process, both sides signed a negotiated agreement in February 2016 that resolved most of the pending cases.

In 2019, an Australian company pursued arbitration against the government for alleged breaches and unlawful rejection of a fuel supply contract. The case went before the Supreme Court of Victoria, Australia, and was resolved in favor of the government in October 2020.

In 2018, overseas arbitration led to a $5 million settlement in favor of a private Spanish construction firm for late payment by the GOTL on a road project in 2018. This is the only known example of a private-sector actor receiving compensation for losses determined to be the fault of the GOTL.

In 2016, a U.S. company and the government of Timor-Leste settled several significant outstanding disputes regarding tax assessments. The parties were unable to resolve a further dispute regarding a withholding tax but agreed to leave the matter with the Singapore International Arbitration Center and accepted the result. The parties also agreed on a shared understanding of the relevant dispute resolution framework and application of penalties, and an agreement to work together towards consolidating the applicable tax laws.

International Commercial Arbitration and Foreign Courts

The domestic court system is not properly equipped to handle commercial or tax disputes, and most legal professionals lack specialized expertise or training in these types of cases. There is no domestic arbitration body in Timor-Leste. Legal dispute resolution rarely takes place in Timor-Leste and established private sector actors tend to travel to Singapore or Australia for arbitration. Local courts recognize and enforce foreign arbitral awards.

There is no formalized mediation system, but private parties in Timor-Leste frequently resolve disputes using attorneys acting as mediators.

Many legal reforms are hindered by limited financial resources and human capacity. For instance, the Dean of the University of Timor-Leste (UNTL) Law School expressed interest in developing an arbitration training program for UNTL law students but acknowledged students’ English skills presented a significant hurdle to participation in international arbitration training and competitions.

There is limited case history regarding SOEs involved in investment disputes, but courts have ruled against SOEs. There have not been complaints of court bias in favor of SOEs.

Bankruptcy Regulations

Timor-Leste enacted an insolvency law in 2023. Law number 1/2023, Legislative Authorization on Insolvency and Business Recovery, grants authorization for the government to establish a legal regime for bankruptcy. Implementing legislation remains to be enacted. In the most recent publication (2020), the World Bank ranked the country 168 of 190 in resolving insolvency with a score of zero reflecting no history of recovery.

Investment Incentives

The Government of Timor-Leste offers investment incentives, including tax credits and import duty exemptions, to both domestic and international investors. There are no investment incentive programs specifically targeting underrepresented investors. An investment might be exempt from income tax, sales tax, and/or service taxes. For most industries, the corporate tax rate is 10%. Domestic investments worth over $50,000, foreign investments of over $1.5 million, and joint foreign and national resident investments where the national resident controls at least 75 percent of shares totaling $750,000 benefit from a five-year exemption from income, sales, and service taxes, and customs duties for goods and equipment used in the construction or management of the investment. The period of exemption is extended to eight years for investments in Rural Zones (outside of the cities of Dili and Baucau) and to ten years for investments in Peripheral Zones (the exclave of Oecusse and the island of Atauro). Even after these periods have expired, investors may deduct from their tax obligations up to 100 percent of the costs of constructing or repairing transportation infrastructure. Government guarantees or joint financing of foreign direct investment is not common practice; however, the government has engaged in a limited number of public-private partnerships, including development of the Timor Port. The government does not currently offer incentives to promote clean energy investments.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are no foreign trade zones in Timor-Leste. Law No.3/2014 of 2014 defines and regulates a free trade zone in the Oecusse exclave called the Special Zone for Social Market Economy (ZEESM). The ZEESM prioritized socioeconomic activities to promote the quality of life and well-being of the community, namely:

• Development of commercial agriculture
• Creation of an ethical financial center
• Creation of a free trade zone (Note: the FTZ has not been established to date.)
• Increased tourism
• Creation of a center for international studies and research on climate change
• Creation of a center of green research
• Implementation and development of industrial activities for export and import
• Other economic activities that add value to the region, as well as strengthen its international competitiveness.

The government approved a decree law in 2016 on the development of Atauro (an island offshore from Dili) as part of ZEEMS. As of April 2023, most of these objectives have yet to be realized.

Performance and Data Localization Requirements

Individual investment agreements and government contracts may specify local content requirements. Local content requirements in the oil and gas sector are particularly strict; requirements in other sectors are often not enforced. In the oil and gas sector, to be considered for production sharing contracts, potential partners are required to include provisions for training and preferential employment for Timor-Leste nationals and for acquisition of goods and services from Timor-Leste. Requirements are applied uniformly to domestic and international investors.

There are no requirements for foreign IT providers to turn over source code or provide access to encryption.

Performance requirements are often established contractually but are not an element of government policy or regulation.

Real Property

Property rights and interests are protected; however, determination of ownership can be difficult and property rights remain an issue of concern for foreign investors and businesses. The legal regime governing land and property ownership in Timor-Leste remains incomplete. A history of displacement, overlapping titles, and lack of legal clarity regarding competing claims on land and properties arising from various occupancies during Portuguese, Indonesian, and post-independence eras make protecting land titles and property rights difficult. While substantial amounts of land are subject to ownership dispute there is no consolidated accounting of the overall share. A comprehensive land law was promulgated in 2017 and national land surveys and registrations have been done. Under the law, claimants must register claims, which will be decided in arbitration. However, issuance of land titles and resolution of disputed title is pending additional government action on additional complementary legislation. Additionally, there are no administrative systems in place to track land transactions following initial titling.

Foreign persons may lease but not acquire land in Timor-Leste. Mortgages exist, however there is no legal mechanism for foreign banks to repossess property in cases of default. There are no requirements to occupy or develop property to retain legal ownership.

Intellectual Property Rights

Timor-Leste is not listed on USTR’s Special 301 Report or the Notorious Markets List.

Section 60 of Timor-Leste’s constitution provides for the protection of literary, scientific, and artistic work. In addition, Article 1223 of the country’s Civil Code stipulates the necessity of specific regulations to protect authors of the property. Also, Article 19 of the Private Investment Law states all investors are entitled to the protection of industrial secrets, copyrights, industrial property rights, distinctive trademark signs, or any other intellectual property rights recognized by law. In December 2022 the government adopted the Copyrights Law No. 14/2022, which is scheduled to take effect in June 2023 after a 120-day period for public dissemination. Enforcement systems are untested. The law guarantees protection for the creation, production, and marketing of literary, scientific, and artistic works, including protection for the rights of the author. The government is finalizing a draft Industrial Property Code, which will contain provisions on trademarks, geographical indications, industrial designs, and patents. The code is expected to be promulgated in 2023.

International companies have printed notices in local newspapers to demonstrate claims to their trademarks and patents. However, the dearth of domestic legislation in this area means that it is unclear the extent to which these practices afford any legal protection.

The government does not track or report on seizures of counterfeit goods. No official or unofficial data is available regarding the prevalence of counterfeit goods in the economy. Timor-Leste is a member of the World Intellectual Property Organization (WIPO). For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Timor-Leste makes limited efforts to control the sale of counterfeit goods, and does make seizures, but does not track volumes or make statistics available.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/. 

Capital Markets and Portfolio Investment

Timor-Leste does not have a stock market. There is limited access to credit and liquidity to facilitate investment. There are no known restrictions on portfolio investment.

Money and Banking System

As of 2019 only 54% of Timorese adults were depositors with commercial banks, and only 4% held bank loans. There are five commercial banks operating in Timor-Leste: ANZ of Australia, Mandiri of Indonesia, BRI of Indonesia, BNU of Portugal, and a subsidized National Commercial Bank of Timor-Leste. The banking system was estimated to hold $734 million in net assets in 2021. All banks in Timor-Leste are subject to prudential measures and regulation by the Central Bank. Since most of the country’s operating banks are branches of foreign banks, the system is relatively resistant to domestic economic shocks. Foreign citizens must have a tax identification number demonstrating residency in Timor-Leste to maintain an individual bank account. According to World Bank data, lending to the private sector totaled approximately $290 million in 2020. According to the Central Bank, the overall non-performing loan rate was 2.4% in 2021.

The Central Bank of Timor-Leste is the country’s monetary authority. It supervises the activities of commercial banks, money transfer operators, currency exchange offices, insurance companies, and other deposit-taking corporations, as well as serving as the operational manager of the country’s sovereign wealth Petroleum Fund. The bank also operates as the clearing house for interbank payments and undertakes bank operations for the government and Timor-Leste’s public administration.

Foreign Exchange and Remittances

Foreign Exchange

The U.S. dollar is the official currency of Timor-Leste. There are no official currency controls, although the Central Bank of Timor-Leste imposes reporting requirements for the importation or exportation of cash above $5,000 and requires explicit authorization for sums in excess of $10,000. Investors may request conversion of funds into foreign currency through the banking system to transfer funds abroad to meet financial obligations incurred by the investment such as payment of imports, payment of capital or interest on loans taken abroad, or payment of rights and management services. The foreign banks operating in Timor-Leste may impose reporting requirements for transactions above a certain amount to comply with home-country anti-money laundering regulations, in addition to the requirements stipulated by the Central Bank. American citizens must have a tax identification number that demonstrates residency in Timor-Leste to maintain an individual bank account.

Remittance Policies

The Private Investment Law (No. 15/2017) guarantees the right to freely transfer funds abroad from any investment or reinvestment in Timor-Leste. This applies to:

• Profit and dividends paid as a result of an investment made;
• Capital resulting from the sale, liquidation, and extinction of shares in commercial companies which constitute investment, as well as the sale of business assets, which are the property of the investor;
• Capital resulting from the reduction of the capital stock of a commercial company constituting an investment;
• Amounts due on the basis of contracts which constitute investment;
• Benefits payable to amortization or payment of financial interest constituting an investment;
• Personal income obtained in the discharge of management and administration functions relating to investment participation in economic activities;
• Income from the transfer of intellectual property rights which constitute investment.
• Compensation payable as a consequence of government requisition or expropriation of the property of an investor;
• Payments arising from settlement of investment disputes.

The right to freely transfer funds abroad must be exercised in accordance with the applicable Central Bank regulations and is limited only by the application of a general legislation, such as tax legislation.

Sovereign Wealth Funds

Established in 2005, the Petroleum Fund is Timor-Leste’s sovereign wealth fund. As of April 2023, the value of the fund stood at $16.9 billion. The Minister of Finance is responsible for its overall management and investment strategy. The Central Bank of Timor-Leste is responsible for its operational management, although the Minister of Finance has the authority to select a different operational manager. By law, all petroleum and related revenues must be paid into the Fund, with the balance of the Fund invested in international financial markets for the benefit of present and future generations of Timor-Leste’s citizens. The Fund’s receipts are invested in approximately 40 percent equities and 60 percent bonds, but 2021 changes to the Petroleum Fund Law permit the Fund to invest up to 50 percent in equities. The Petroleum Fund publishes monthly, quarterly, and annual reports online. Laws governing the Fund provide that it must maintain an independent auditor, which shall be an internationally recognized accounting firm. The Petroleum Fund meets the 24 generally accepted principles and practices for sovereign wealth funds, commonly referred to as the “Santiago Principles.” Timor-Leste is a full member of the International Forum of Sovereign Wealth Funds.

The Petroleum Fund is the primary source of funding for the government budget, with a ceiling on annual withdrawals set by law at 3 percent of Timor-Leste’s total petroleum wealth (defined as the current Petroleum Fund balance plus the net present value of future petroleum receipts). Recent budgets and supplementals have exceeded the annual ceiling with parliamentary approval. However, budgets are rarely fully executed, regularly returning up to one-third of their value to government coffers.

The Petroleum Activities Law no 13/2005, article 22, limits the government to investing 20 percent of the fund in petroleum activities. The government amended the law in 2019 to allow 5% of the Petroleum Fund to be invested in Timor Gas and Petroleum (Timor GAP), the national oil company, while reducing the percentage of the Fund held in stocks from 40% to 35%. Timor GAP must use the investment to exploit known oil and gas fields, which are commercially competitive and will contribute to development and diversification of the national economy. Timor GAP shall pay 4.5% interest on the investment and comply with reporting requirements.

Privatization Program

Timor-Leste does not have a privatization program.

Additional Resources

Department of State

• Country Reports on Human Rights Practices ( https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/ )
• Trafficking in Persons Report ( https://www.state.gov/trafficking-in-persons-report/)
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities ( https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/)
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises ( https://www.state.gov/u-s-national-contact-point-for-the-oecd-guidelines-for-multinational-enterprises/)
• Xinjiang Supply Chain Business Advisory ( https://www.state.gov/xinjiang-supply-chain-business-advisory/)

Department of the Treasury

• OFAC Recent Actions ( https://ofac.treasury.gov/recent-actions )

Department of Labor

• Findings on the Worst Forms of Child Labor Report ( https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings )
• List of Goods Produced by Child Labor or Forced Labor ( https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods )
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World ( https://www.dol.gov/general/apps/ilab )
• Comply Chain ( https://www.dol.gov/ilab/complychain/ )

Climate Issues

Timor-Leste released a National Climate Change Policy in 2020 but has not established any policies to reach net-zero carbon emissions by 2050. The country submitted a National Adaptation Plan (NAP) in 2020 as part of its commitment to the UNFCCC and the Paris Agreement. Timor-Leste submitted its first Intended Nationally Determined Contributions in 2017, and updated NDCs in August 2022. The government does not have policies or regulatory incentives to promote renewable energy. Timor-Leste has enacted several laws addressing environmental policies, including the Environmental Basic Law (which includes climate change adaptation and mitigation issues), the Environmental License Decree Law, the Operational Law of Clean Development Mechanism, The Decree Law on Export, Import, and Use of Ozone Depleting Substances in Timor-Leste, and the Decree Law on Protected Areas. There are no policies that target commodity or supply chain drivers of deforestation. Public procurement policies do not include environmental or green growth considerations for resource efficiency, pollution abatement, or climate resilience. Data for greenhouse gas emissions do not exist beyond 2015.

Resources to Report Corruption

Contact at the government agency or agencies that are responsible for combating corruption:

Anti-Corruption Commission of Timor-Leste
Rua Sergio Vieira de Mello
Farol
Dili, Timor-Leste
Phone: +670 77305564; +670 77326597; or +670 77326599

Contact at a “watchdog” organization:

La’o Hamutuk – Walk Together
PO Box 340, Bebora, Dili Timor-Leste
Phone: +670 3321040
Mobile: +670 77234330
Email: info@laohamutuk.org 

Lalenok ba Ema Hotu (LABEH) – The Mirror for the People Avenida Presidente Nicolao Lobato-Comoro-(in front of SDN.07-Malinamuc)
Comoro
Dili, Timor-Leste
Phone: +670 3331068
Email: info@labeh.org