Political Maneuvering - Leading Timor-Leste Down a Dead End?6 Jun 2022 13:42
"Gusmao’s success or failure to form a new governing coalition will have significant implications for Timor-Leste’s diplomatic and strategic orientation. Critical to the country’s future is the status of its $19 billion sovereign wealth fund, the Petroleum Fund, which underwrites more than 90 percent of Timor-Leste’s budget and is the country’s key economic driver. Despite diminishing oil revenues, the government continues to spend in excess of sustainable Petroleum Fund withdrawals by more than double, creating the prospect that the fund will be depleted. Without developing other areas of the economy or significantly cutting government spending—which would have wider economic implications—the country will likely face a critical economic reckoning at some point in the mid-2030s, based on its budgets over the past 14 years.
As of today, however, there is still no sign of any other sector of Timor-Leste’s economy making headway, much less looking like it could replace oil-based revenue. Tourism and agriculture are touted as alternative sources of income, but tourism remains depressed—not least due to high costs and limited infrastructure—while agricultural production is insufficient to meet national needs, much less the needs of potential trading partners.
As a potential economic alternative, Gusmao’s plan for the future is to develop the Tasi Mane liquefied natural gas facility, which is fed by natural gas reserves in the Timor Sea’s Greater Sunrise fields. His 2012 government had already earmarked more than $2 billion for the project, but this somewhat grandiose plan was quietly mothballed in 2018, following a lack of international interest in developing the Greater Sunrise fields if it was, as Gusmao insisted, to be associated with an onshore refinery, rather than a pipeline to Australia for processing there.
The lack of commercial interest reflects the lack of domestic capacity in Timor-Leste. Establishment costs are estimated at $18 billion against moderate returns and the high logistical and technical risks associated with the project. As a result, within a week of his election, Horta called on the Australian government to financially support the development of Tasi Mane as part of strengthening bilateral relations. It would also be a way for Horta to deliver to his political benefactor, Gusmao.
If Australia refuses to help develop the project, Horta says Timor-Leste would look to Beijing to do so, building on an already expanding economic relationship with China. China’s Exim Bank, however, has for now balked at funding the project for the same reasons that foreign energy companies have shied away from it. But that could change, as China’s economic and strategic interests are closely linked. In the context of shifting regional power relations, Timor-Leste is seen as a plum strategic prize."
https://www.worldpoliticsreview.com/articles/30582/complex-political-maneuvering-following-elections-for-timor-leste-president
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