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Factba.se: Australia DFAT Country Briefs - Timor-Leste
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COUNTRY BRIEFS


INTRODUCTION

Australia and East Timor have a very close relationship, based on proximity and close people-to-people links. Australia was in the front-line of support for East Timor's transition to independence and continues to play an important role, including through the provision of extensive development and security assistance.

East Timor's population of around 1.1 million is among the fastest growing in the world, with an estimated average growth rate of 3.2 per cent between 2005 and 2010. The official languages are Tetum and Portuguese, while English and Indonesian are working languages. Approximately 95 per cent of East Timorese are Catholic.

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POLITICAL OVERVIEW

The Democratic Republic of Timor-Leste (East Timor) achieved formal independence on 20 May 2002. East Timor will celebrate its 10th anniversary of independence in 2012. East Timor's independence resulted from the August 1999 UN-sponsored referendum, in which 78.5 per cent of the population voted for independence. The United Nations Transitional Administration in East Timor (UNTAET) was established in 1999 after widespread violence and destruction that followed the independence vote. It administered East Timor until formal independence in 2002.

The first democratic legislative elections were held on 30 August 2001. Over 91 per cent of East Timor's eligible voters elected a Constituent Assembly. In March 2002, the Constituent Assembly approved East Timor's Constitution (based on the Portuguese model) with an elected President as head of state and Prime Minister appointed from the political party, or alliance of political parties, with a majority in the unicameral parliament.

Dr Jose Ramos-Horta replaced Xanana Gusmão as President on 20 May 2007, following presidential elections. After parliamentary elections, Xanana Gusmão was appointed as Prime Minister and sworn in with his cabinet on 8 August 2007. Prime Minister Gusmão leads a coalition government called the Alliance of the Parliamentary Majority (AMP), comprising the CNRT, ASDT, PSD, PD and UNDERTIM parties (see chart below). Fernando 'Lasama' de Araujo of the Democratic Party (PD) is the President of the Parliament (equivalent to a Speaker). Fretilin is the major opposition party in Parliament.

Five hundred observers from 15 countries, including Australia, and international organisations observed the 2007 presidential and parliamentary elections and overwhelmingly characterised them as peaceful, fair and democratic.

On 11 February 2008, President Ramos-Horta was shot and severely wounded in an attack led by rebel Alfredo Reinado (who was allegedly involved in the unrest of April/May 2006 and who had escaped from jail on 30 August 2006). Reinado was killed in the attacks. A short time later a convoy including Prime Minister Gusmão was fired on. The Prime Minister was uninjured. President Ramos-Horta returned to East Timor on 17 April 2008, after receiving medical treatment in Australia. An officially-declared "state of siege" ended in May 2008, following the surrender of rebel leader Gastao Salsinha and most of his followers. Since that time, the security situation has improved and remains stable. Separate Presidential and Parliamentary elections will be held in the first half of 2012.

The role of the United Nations

UNTAET's mandate expired with East Timor's independence on 20 May 2002. A peacekeeping mission, the UN Mission of Support in East Timor (UNMISET) was then established to provide assistance to the new East Timorese Government in the areas of public administration, law and order and external security.

A smaller political mission, the United Nations Office in Timor-Leste (UNOTIL) replaced UNMISET on 20 May 2005. UNOTIL was established to carry out peace-building activities and support the capacity development of state institutions, including the National Police (PNTL), to strengthen democratic governance and to help build peace in East Timor.

UNOTIL was replaced by the current UN Integrated Mission to Timor-Leste (UNMIT) on 25 August 2006 following a serious deterioration in the security situation in April and May 2006. UNMIT has focused on policing functions and police training, political and community reconciliation, assistance for elections and humanitarian relief services. On 24 February 2011, the UN Security Council extended UNMIT's mandate for a further year until 26 February 2012. Australia contributes police personnel to UNMIT.

Australia leads the International Stabilisation Force (ISF) that was requested by the East Timorese Government to help restore stability following the unrest experienced in 2006. The ISF was originally comprised of Australian and New Zealand soldiers, and police from Portugal and Malaysia. After UNMIT was established the ISF was comprised of Australian and New Zealand soldiers. The ISF operates independently from, but in support of, UNMIT.

East Timor became the 191st member state of the United Nations on 27 September 2002. It is also a member of the World Bank, International Monetary Fund (IMF) and the Non-Aligned Movement (NAM). It is a member of the Community of Portuguese Language Countries and the ASEAN Regional Forum and is an observer to, and is seeking full membership of, the Association of South-East Asian Nations (ASEAN). East Timor is an observer to the Pacific Island Forum.

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ECONOMIC OVERVIEW

East Timor is one of the poorest countries in the Asia-Pacific region. It was ranked 120 out of 169 countries in the 2010 UN Human Development Report. While it scores poorly in the UN Development Program's indicators, the situation is improving with East Timor moving up the ranking by eleven in the last five years and improving its score to the point where the UN now considers it to have medium, rather than low, human development.

While it has made significant progress in building an institutional framework to support economic development and promote macroeconomic stability, East Timor's economy remains fragile. Following a sharp contraction in GDP growth in 2006, East Timor's economy grew, on average, by 9.9 per cent between 2007 and 2010. The IMF has forecast GDP growth of 8.2 per cent in 2011. Inflation of 4 per cent was recorded for 2010 and the IMF expects this rate will remain unchanged in 2011.

East Timor faces a range of long-term development challenges to the achievement of sustainable and broad-based economic growth. These include a low skill base  and weak public governance. These challenges are compounded by profound infrastructure deficits, notably in the areas of transportation, telecommunication and electricity. Instability has, in the past, undermined government efforts to promote private sector investment as a driver of development. East Timor ranked 164 of 183 in the World Bank's 2010 Doing Business report.

East Timor benefits from the commercial exploitation of petroleum resources in the Joint Petroleum Development Area (JPDA) in the Timor Sea, which are shared with Australia. Australia and East Timor have three treaties between them that govern maritime arrangements in the Timor Sea. The Treaty on Certain Maritime Arrangements in the Timor Sea, which entered into force on 23 February 2007, sets aside the question of maritime boundaries and jurisdiction between the two Parties for the life of the treaty. The treaties allow for the exploration and exploitation of petroleum resources in the JPDA for the benefit of both countries.

More information on Australia's maritime treaty arrangements with East Timor (http://www.dfat.gov.au/geo/east_timor/index.html) .

Exploration also continues in East Timor’s exclusive areas. East Timor's economy is one of the most heavily petroleum-dependent in the world. The East Timorese Government is seeking to use its oil revenues in support of long-term economic development, economic diversification and poverty reduction. East Timor has established an internationally-acclaimed Petroleum Fund to manage its petroleum revenues transparently and sustainably. As at 30 September 2011, the fund was valued at over US$8 billion.

On 13 July 2011 the East Timorese Government released a Strategic Development Plan, which provides a framework for development for 2011-2030.

Trade

In 2009-10, East Timor ranked as Australia's 93rd largest goods trading partner, with total merchandise trade valued at $42 million. Australian exports to East Timor were valued at $41 million with major items including passenger motor vehicles, civil engineering equipment, vegetables, and machinery. Imports were valued at $1 million, mostly coffee. East Timor has had preferential duty free access and quota free access to the Australian market since July 2003.

East Timor has a steadily improving overall global trade balance, reflecting the contribution of petroleum development. Excluding hydrocarbons, coffee accounts for around 90 per cent of merchandise exports.

Agriculture

Agriculture dominates the East Timorese economy, accounting for over 30 per cent of GDP and around 75 per cent of employment. Relatively low food production by small-holders as well as underdeveloped local markets has led to a dependency on imports. Transforming subsistence farming into an export-oriented industry is a challenge. Key crops such as coffee and vanilla, and potentially candlenut and palm oil, are being targeted for increased capital investment.

Finance and banking

The US dollar was adopted as the official currency in January 2000. Timorese coins in denominations of 1, 5, 10, 25 and 50 centavos were introduced in November 2003 to enable small denomination transactions and partially assist with monetisation of the economy.

Legal and judicial issues

East Timor's legal system is based on civil as opposed to common law. Although a broad range of legislation has been promulgated, further strengthening of legal and judicial frameworks will be key to promoting economic development and effective governance in East Timor. Important commercial legislation that has already been passed by Parliament includes company law, commercial registry and tax legislation providing further incentives to investors. Further legislation is intended to simplify the business registration process. The introduction of land ownership, foreign investment, bankruptcy, banking and insurance laws is a priority. The Government of East Timor is also developing additional private sector enabling legislation, designed to establish an open, attractive and competitive environment for investment. Central to this aim has been the establishment of an Investment and Export Promotion Agency. Proposed legislation to establish a land law regime, including recognition of traditional land ownership, is expected to be considered by the Parliament in 2011. The  East Timorese Constitution does not recognise foreign land ownership.

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BILATERAL RELATIONSHIP

The Australian people have a special affinity with East Timor stretching back many decades. Australia was in the front-line of support for East Timor's transition to independence. Australia led the multinational INTERFET force which restored security in East Timor following the 1999 post-independence ballot violence. Australia also leads the ISF, which deployed to East Timor at the request of its government to help restore stability following the unrest in 2006. Following the events of 11 February 2008, the Australian Government deployed additional soldiers and police under the ISF. These additional forces have now been withdrawn. The ISF remains in East Timor at the invitation of the East Timorese Government and in support of UNMIT. As the security situation has improved, with the agreement of the East Timorese Government, force numbers have gradually declined.

Australia and East Timor signed a Memorandum of Understanding (MOU) on cooperation to address transnational crime in December 2010, an MOU on Cooperation to Combat International Terrorism in August 2003, and two MOUs on combating illegal immigration and people smuggling in February 2002. Australia and East Timor also signed an MOU in October 2006 on security arrangements within the JPDA.

Reflective of the strength of the bilateral relationship, there have been numerous high-level visits between Australia and East Timor. Then Prime Minister Rudd and Foreign Minister Smith visited East Timor on 14 December 2007 as part of their first overseas visit. Mr Rudd visited East Timor again on 15 February 2008 to express solidarity following the 11 February 2008 attacks. The most recent ministerial visitor to East Timor was the Former Foreign Minister Mr Rudd in July 2011. Defence Minister Mr Smith visited East Timor most recently in April 2011. East Timor's Foreign Minister, Zacarias da Costa, paid official visits to Australia in February 2008, February 2009 and June 2010. Prime Minister Gusmão, accompanied by a range of ministers, secretaries of state and East Timor's Chief of the Defence Force, visited Australia as guest of the Government in August 2008. The Australian Governor General, Ms Quentin Bryce, visited East Timor in December 2008 and East Timorese President Ramos-Horta visited Australia as a Guest of Government in June 2010, accompanied by three Ministers. Australia's Minister for Immigration, Chris Bowen, visited East Timor in October 2010, and the Minister for Home Affairs Brendan O'Connor visited in December 2010.

Development assistance

Although East Timor is one of the poorest countries in the Asia-Pacific region, it has made considerable progress since independence but it will require substantial assistance by the international community, including Australia, for some time to come. As a close neighbour, Australia is strongly committed to East Timor's development priorities and provides support to assist the Government of East Timor to achieve stability and greater prosperity. Australia's Official Development Assistance for East Timor in 2011-12 will be an estimated $124 million. See AusAID website (http://www.ausaid.gov.au/country/country.cfm?CountryId=911) for more detail.

Over the years Australia has supported: the strengthening of East Timorese Government institutions, including the building of appropriate institutions and policies for the efficient use of its petroleum revenues; the strengthening of democracy through support for elections, and the development and implementation of legislation and public administration systems; access to education and vocational training and employment opportunities; access to health services, including the restoration of surgical services across East Timor; the enhancement of the livelihoods and well-being of the rural poor, including the provision of clean water for over 60,000 people; and security sector reform.

Australia also supports improvement in the delivery of basic services. This includes assistance for: strengthened rural water supply and sanitation, with an emphasis on environmental health; strengthened health systems and improvement in maternal and child health; expansion of vocational education, training and job opportunities for youth, particularly in rural areas; and improved food security.

Australia also continues to work with the East Timorese Government to assist the development of East Timor's security forces. Through the Timor-Leste Police Development Program, the Australian Federal Police are helping to build policing skills and education levels within the East Timorese Police Force (PNTL). Australia is also a lead donor in the development of the East Timorese Defence Force. Our Defence Cooperation Program focuses on capacity building through in-country training and professional advice.

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AUSTRALIA TIMOR-LESTE COUNTRY STRATEGY

The Australia Timor-Leste Country Strategy 2009 to 2014 sets out how Australian development assistance, primarily delivered by AusAID and the Australian Federal Police, will assist the government and people of East Timor to work towards the Millennium Development Goals.

Developed in partnership with East Timor's government, the Strategy has a sharp focus on achieving results in the priority areas of health, education, employment, government accountability and police capacity. These priority areas strongly align with East Timor's national priorities. There is also a focus on poverty reduction through strengthening security and building state legitimacy.

Key Australian and East Timorese stakeholders, including state and local governments and non-government organisations, and the multilateral development banks, were consulted throughout the process of developing the strategy.

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TRAVEL

Australians planning on visiting East Timor should consult the travel advice for East Timor (http://www.smartraveller.gov.au/zw-cgi/view/Advice/East_Timor) before departure.

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Last Updated: February 2012

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