Timor-Leste is a young, reasonably well-functioning democracy, although institutions are still fragile. Timor-Leste has one of the youngest populations in the Asia-Pacific region, with a median age of 17.4 years - 74% of the population are below the age of 35 years.
Timor-Leste is a Least Developed Country and is heavily dependent on gas and oil extractions. The government has recently signaled its intent to join the Interim Economic Partnership Agreement between the EU and several Pacific countries. The objective is to support economic diversification, economic growth and job creation, and to complement the ongoing accession process to the World Trade Organization and the Association of Southeast Asian Nations (ASEAN), which is the main foreign policy priority of Timor-Leste.
The basis for the EU’s Multi-annual Indicative Programme (MIP) for Timor-Leste is the country’s 2011-2030 Strategic Development Plan (SDP), complemented by the government’s post-COVID economic recovery plan. The current government programme, which is derived from the SDP, describes the strategic development agenda of Timor-Leste in four key sectors:
- social capital
- economic development and job creation
- consolidation of the institutional framework
The SDP articulates a strategy to transform Timor-Leste into ''a medium-high income country by 2030, with a healthy, educated and safe population that is prosperous and self-sufficient in terms of food”.
The MIP covers two priority areas, based on relevance and the intention to become the “partner of reference” for the Timorese people in the areas we intend to support
- green and sustainable economic recovery and development
- good governance for sustainable development
The Multiannual Indicative Programme (MIP) for Timor-Leste amounts to €55 million until 2024, when a mid-term review will take place.
Priority area 1: Green and sustainable economic recovery and development
The overall objective of this initiative is to support the Timorese government in the implementation of its own economic recovery strategy to make it diversified, greener, inclusive, and human-centred, using resources aided by digital transformation. Green economic recovery will deliver a sizeable impact and make the EU a reference partner for the green transformation of the economy. We will help to ensure a sustainable and inclusive recovery from the devastating effects of COVID-19.
This priority area will propel economic growth and the diversification required for a major improvement in human resources, institutional capacities, connectivity and the business/investment framework. It will diversify the Timorese economy and private sector development. This involves enhancing the small and medium-sized enterprise sector, while removing some of the constraints to private sector growth and improving infrastructure, increasing efficiency in the public sector, facilitating credit, and building up skilled labour.
Priority area 2: Good governance for sustainable development
Good governance is fundamental for socio-economic development and to sustain a peaceful society. The Timorese government does not currently lack economic resources, but its institutions are weak. The EU is already a reference partner in public finance management due to an ongoing budget support operation. Much support is needed in this area as it provides the basis for any economic development. The fact that Timor-Leste features so low in the World Bank’s annual “Ease of doing business” rankings is largely due to ineffective institutions and a lack of regional integration.
This area reinforces the implementation of ongoing reforms that the Timorese government is carrying out and needs support for, not only from the EU, but from other development partners. Additionally, it supports the capacity of the government to provide public statistics data, prepare transparent and clear annual budgets and effective planning resources through a Multiannual Financial Framework.
Timor-Leste is one of the 18 countries and territories in the 'Green-Blue Alliance' - a regional Team Europe Initiative. This alliance, launched at the UN Climate Change conference COP26, brings the transformative power of the EU Green Deal to the region based around two pillars: climate ambition and the sustainable use of natural capital.
Based on the EU Roadmap for Engagement with Civil Society in Timor-Leste, the EU will support civil society efforts to promote green and sustainable recovery and development, human rights, gender equality and peacebuilding. The EU and its Member States will support civil society organisations (CSOs) to implement projects through calls for proposals and direct grants. An ‘open door approach’ will be assured, so the EU is available to meet with CSOs to discuss topics of interest related to the fundamental values of peace, freedom, equal rights, and human dignity in Timor-Leste.