New council to build business ties with East Timor; the new country of East Timor is looking to rebuild after its tumultuous past. Tamsyn Smith reports on how Australian businesses are helping with the process - New Opportunities

Business Asia, July, 2002 by Tamsyn Smith

On 20 May this year, East Timor became the world's newest country. The celebrations of becoming an independent nation have been replaced by an energetic bid to attract the right kind of foreign investment, as the East Timor Government takes a realistic look at the state of its affairs.

The country is currently suffering from an energy crisis, disrupted infrastructure and an unstable economy--an overall situation that requires a great amount of effort to turn around.

To assist in this rebuilding, a group of Australian businesses have formed the Australia-East Timor Business Council (AETBC), which met for the first time in Sydney last month.

The council aims to encourage and develop business opportunities between the two countries by coordinating Australian business input into the reconstruction of East Timor, in close cooperation with both governments.

Private sector help

Jose Teixeira, East Timor's Secretary of State for Tourism, Investment and the Environment, welcomed the formation of the AETBC, saying that such organisations are very important to removing the barriers to doing business in East Timor.

Teixeira is aware that any economic development would come from the private sector, particularly from overseas. To this end, the country is developing a national plan that looks at a "one stop shop" approach to establishing a regulatory framework to introduce foreign investment.

A "Commercial Code" is being written by a team of judges and lawyers on loan from Macau who, according to Teixiera, would set out the form, the rights, the means and the obligations.

"It's not final, but it shows the basic thinking of the government," Teixeira says.

The Code includes a so-called "non-discriminatory licensing system", based on a "negative list".

This means there will be certain commercial sectors that are reserved for East Timorese nationals only, which Teixeira says is because there are areas where East Timorese have the ability to participate, such as the operation of taxis.

"If we were to allow others in, we'd have a revolution. We need to protect to some measure those people who are providing a service they're capable of providing," he said.

Certificates

When a potential investor does fall into a suitable category, such as accountancy or construction, a certificate of clearance is issued covering all legal and regulatory requirements.

"Once you have the certificate, you will not have to jump through hoops," Teixeira explains.

The obvious aim behind this process is to encourage investment in key areas, which is part of the country's 20-year plan, says Teixeira.

A particular emphasis is on the agricultural sector, including forestry and fisheries.

"We must develop the agricultural base because over 80 per cent of the population is involved in agricultural pursuits," he said.

Australia's Minister for Foreign Affairs, Alexander Downer, said East Timor would remain dependent on international donor support for at least three years.

"Australia will continue to work closely with East Timor towards sustainable economic development, as long as it continues to demonstrate sound governance," Downer says.

He deemed the country's first budget to be responsible and realistic, although he had some words of advice, including pointing out the need to establish a planning framework, substantial investment in infrastructure, and a clear and stable regulatory environment.

"East Timor's future depends ultimately on a thriving private sector ... the public sector is not going to be a great wealth producer," he said.

Gas treaty

Australia does stand to gain from good relations with East Timor, particularly in the fruits of the Timor Sea.

A treaty between the two countries means gas will be processed on-shore in Darwin, and 90 per cent of revenue from petroleum production will flow into East Timor, which Downer says will underpin the viability of East Timor's national economy.

"Australia is determined that the Timor Sea be a unifying factor between the two nations--binding us to work together," he said.

Australia would do what it could to help create an export orientated private sector, which has begun already with discussions with the East Timor government about duty free agreements for goods, providing free access "across the board" into the Australian market, says Downer.

For the East Timorese Government, the primary focus is on getting the processes in place to let the business flow in, something Teixeira says is an area which must be worked very hard on.

"It's hard work, but at the end of the day, if you took at the economic opportunities and invest time and effort ... I believe that we will have results a lot sooner than people think," he said.

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