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September 2005 - August 2008 Establishment In October 2004, the Timor-Leste Ministry of Planning and Finance conducted a public consultation on the concept of establishing a Petroleum Fund for Timor-Leste, which would receive revenues from petroleum and manage them in a sustainable way. From January to June 2005, Timor-Leste's government and parliament conducted public consultations and hearings on the Petroleum Fund Act, which was passed unanimously in July 2005. The Timor-Leste Banking and Payments Authority (BPA), which will administer the Petroleum Fund, signed an Operational Management Agreement with the Ministry of Planning and Finance in July. The BPA published an explanation of how the fund will work in its newsletter the same month. The government announced the establishment of the Petroleum Fund on 22 September 2005. Civil Society elected its representatives to the Petroleum Fund Consultative Council in February 2006, but the PFCC did not become operational until the end of 2006. Its members, chosen according to the Petroleum Fund Act, include Former Prime Minister Mari Alkatiri, NGO representatives Thomas Freitas (Luta Hamutuk) and Maria Dias (Rede Feto), Parliament's nominees Antero Benedito da Silva and Nuno Rodrigues, Presidential appointee Francisco da Costa Monteiro, Aurelio Guterres (nominated by Parliamentary President Lu-Olu), business sector representative Oscar Lima and church representative Reverend Francisco Vasconcelos. The lead article in La'o Hamutuk's March 2007 Bulletin is about the Petroleum Fund. The fund started in September 2005 with an transfer of petroleum royalties which had been collected in preceding years. During the rest of 2005 and 2005, no withdrawals were made. In late 2006, the Bayu-Undan project moved into a higher "profit oil" tax rate because of the profitability of the project, which is why TSDA receipts increased significantly in early 2007. The first withdrawal (transfer to the Government's operating budget) from the fund ($120,000,000) was made on 21 March 2007, and two more withdrawals totaling $140.07 million were made in May and June. However, most of this money was not spent, but is held in banks and investments by the Government (as distinct from the Petroleum Fund). According to the quarterly Balance Sheets from the BPA (available from www.bancocentral.tl/en/balancesheet.asp), government assets held in the Treasury Account of the BPA (not including the Petroleum Fund) increased from $56.1 million at the end of 2006 to $248.0 million at the end of June 2007.
During October 2007, the Parliament of Timor-Leste enacted a $117 million transitional budget for the last six months of calendar 2007, including a $40 million transfer from the Petroleum Fund. The Petroleum Fund Act requires an audited estimate of sustainable income and prior consultation with the Petroleum Fund Consultative Council prior to passing a budget, but this was not done. The PFCC wrote a letter to Parliament objecting to their exclusion from the process. The entire budget could have been funded with the Government's Treasury account (which contained $248 million at the start of the six-month period, $119 of which was unspent obligations from previous years), but the authorized $40 million was transferred from the Petroleum Fund on 18 December 2007. At the end of 2007, the BPA held $189 million for the government in its Treasury Account, although this was reduced to $138 million by the end of March 2008. Timor-Leste has changed its fiscal year to the calendar year; the budget for 2008 estimates a sustainable income of $294 million, and plans to transfer all of it. As Parliament was debating the budget in December 2007, the Petroleum Fund Consultative Council wrote a Public Declaration questioning some of the calculations. In June 2008, the Government proposed a mid-year Budget Rectification which increases the 2008 budget by 122%, to nearly $800 million. Of this, $686.8 million is to come from the Petroleum Fund, a re-estimated sustainable income of $396.1 million, plus another transfer of $290.7 above the sustainable level. Exceeding the ESI was strongly criticized by, among others, civil society, the IMF, the World Bank, Fretilin and the Petroleum Fund Consultative Council. It was passed by Parliament anyway. The balance in the Petroleum Fund at the end of June 2008 stood at $3,203,073,135. No withdrawals were made from the fund during the first half of 2008. Reports The BPA is required to publish reports on the Petroleum Fund 40 days after the end of each quarter. The BPA also issues a quarterly press release summarizing the report. La'o Hamutuk reviewed the first report in our December 2005 Bulletin, and published a more comprehensive article on the Fund in our March 2007 Bulletin.
The first Annual report of the Petroleum Fund, covering September 2005-June 2006, was published in June 2007. The second Annual Report, for July 2006-June 2007, was published in January 2008. These reports and press releases are usually available in Portuguese and Tetum at http://www.bancocentral.tl/PF/Reports.asp. Most petroleum revenues Timor-Leste earns at present come from Bayu-Undan in the Joint Petroleum Development Area established by the Timor Sea Treaty. This is managed by the Timor Sea Designated Authority, which publishes monthly revenue and other information at http://www.timorseada.org/ftpet.html. The Petroleum Fund Quarterly Reports aggregate income to the Fund as "taxpayer receipts," including these payments from the TSDA as well as payments by companies directly to the RDTL government. All pages linked to by this page are English unless otherwise specified. Many of the documents are in Adobe Acrobat format (PDF) and may require Adobe Acrobat Reader (free download) to be read. |
The Timor-Leste Institute for Development Monitoring and Analysis (La’o Hamutuk) |
