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Public-Private Partnerships
To build grandiose infrastructure projects

Link to more complete and current information on Tibar Port.

24 March 2013.  Updated 3 June 2014

Liga ba pajina ida ne'e iha Tetum.

During 6-7 March 2013, the International Finance Corporation (IFC, part of the World Bank Group), the Timor-Leste Ministry of Transport and Communications, and the Ministry of Finance hosted a Public-Private Partnership (PPP) Investor Conference for companies interested in building Tibar Port or expanding Dili Airport. About 150 people attended, representing construction contractors and investors from all over the world (download list of participants, companies and email addresses). Prime Minister Xanana Gusmão addressed the assembled guests.

Although the event was closed to media and civil society, the Government and IFC held a briefing for interested NGOs after the conference to share the presentations that were given to the investors. The Government has given La'o Hamutuk permission to share the presentations on the Port (also Tetum) and Airport (also Tetum) (3 MB each) that they made to the invited guests (more information is below, on the parts of this web page on each project). A few weeks later, IFC launched its own website on the investor conference and follow-up.

Prior to the conference, IFC hired two Australian companies to assess the environmental and social impacts of the proposed projects. WorleyParsons, an engineering company which does logistic support for the Bayu-Undan platform and prepared an EIA for the Tasi Mane project, is doing Dili Airport, while Tibar Port is being assessed by EcoStrategic. In addition to the economic and social studies, IFC hired Hamburg Port Consultants and Ambidji Group as technical consultants to study technical and business planning issues related to the development of each project.

In May 2012, IFC engaged the UK-based Private Infrastructure Development Group (PIDG) to help mobilize investor interest in these two projects. PIDG/DevCo's $1.5 million commitment to Tibar Port is their largest in at least seven years. PIDG's "case study" flyer includes information not available elsewhere, but some of it is inaccurate or outdated, particular regarding Dili airport.

Following IFC evaluation of the legal, technical, environmental, social, financial and market aspects of each project, IFC presented "Transaction Structuring Reports" to the Government, in May 2013 for the port in July for the airport. After tenders in late 2013 and contract negotiations and design during 2014, construction may begin in January 2015 for both projects.

All decisions, including those about design, specifications, schedule, choice of contractor, financial aspects, and who will bear the risk and makes the profit, will be made by Timor-Leste's Government. IFC's role is to facilitate involvement of private sector companies in such projects. Although it will insist on international standards for all issues, the only leverage IFC has is to walk out, in which case the Government may by obligated to reimburse IFC for some costs. We hope Timor-Leste doesn't repeat the experience of the heavy oil electricity project, when the Government squeezed Asian Development Bank (ADB) out of the picture and proceeded to make many costly mistakes.

Public-Private Partnership (PPP) is a loosely-defined term which covers a wide range of government-company relationships from BOT (Build-Operate-Transfer, where the state provides the land but the company invests the money, operates the project, and takes the profit or loss for years before handing it over to the government) to direct contracting (the government pays for everything, the company designs and constructs the project, and the government operates it). The details are yet to be worked out, as is the sharing of profit and risk. IFC has been helping the Government develop these ideas since 2004. IFC maintains a blog with information about its two projects in Timor-Leste, and has published its Performance Standard #1 for Environmental and Social  Risk assessment.

RDTL Decree-Law 42/2012 (Portuguese), enacted on 7 September 2012, established a legislative framework for PPPs. On 5 November 2013, the Council of Ministers amended it thusly.

Both of these projects are derived from the National Strategic Development Plan and are based on very optimistic projections of future traffic. IFC, its subcontractors and the Ministry of Transport are moving full steam ahead to implement them, but we hope that someone is evaluating whether or not they serve the interests of Timor-Leste's people. They create obvious hardships to people who live in the project areas, but could also require all citizens, as owners of Timor-Leste's petroleum wealth, to pay for their costs, including likely losses if traffic turns out not to be as large as the Government and IFC imagine. IFC is proposing a staged approach to both projects, linking infrastructure and investment expansion with demand, as a way to reduce the risk if demand grows more slowly than expected.

In March 2013, the Ministry of Finance recruited a nonresident advisor for PPPs and a resident infrastructure project officer.

 

 

 

Budgeted allocations for these projects
(USD millions)

 spent 2012

2013

2014 20152016 2017 after 2017

From Infrastructure Fund in final 2013 State Budget

Dili airport0.03.015.020.020.020.0more
Tibar Port0.73.815.025.030.050.0more

From Infrastructure Fund in final 2014 State Budget

Dili airport (RDTL)005.653.668.930.6100.0+
Dili airport (loans)   15.025.040.014.0+
Another $2.5 million is allocated in 2015
to rehabilitate Dili airport runway.
Tibar Port0.71.53.520.4109.59.9more

 

 

Click on any drawing to see it larger.

Dili Airport

In July 2012, IFC approved an two-year, $1.5 million project to support Timor-Leste's development of the PPP for Dili airport.  IFC's advisory services will cover all pre-investment activities.

In March 2013, the Government released a graphical summary of the current Dili airport.

As these graphs show, IFC expects the number of passengers flying in and out of Dili airport to multiply five-fold during the next 20 years.  By 2036, they anticipate more than 300,000 Timorese people to take flight every year -- approximately one out of every eight Timorese citizens flying a round trip annually. Air travel is, of course, used by the most affluent part of our population, and we hope that the costs of their journeys are not enabled by continuing low allocations of public funds for health, education and rural infrastructure. IFC declined to share cost estimates with civil society.

Although Government officials dream that Timor-Leste may become a regional air transit hub with flights to Qatar and other distant places, the proposed plan envisions flights with a range of 2,100 nautical miles (3,900 km) -- as far as Hong Kong, Melbourne or Bangkok.

IFC is proposing that the airport be built in two stages: extending the current 1,800m runway to 2,050m immediately, and to 2,500m in about 20 years. More details are in their brief and presentation (also Tetum) to the investor conference, and in the Questions & Answers that IFC prepared following the conference.

If you have Google Earth installed on your computer, click here and open the file it links to to see the two stages of both options overlaid on a Google Earth photo or map.

IFC presented a draft report to the Government in early May, prompting an article in Timor Post Expand Comoro Airport: Threatens Four Villages, as well as an editorial on 9 May. Click on the graphic at right to read them. We understand that the Government has suggested some changes, but have not seen anything concrete.

As time passed with no additional information from project proponents, community unease mounted. On 23 May, the Asian Catholic news agency UCA News reported that Up to 10,000 face relocation. On the same day, Timor Post headlined that 1,114 families were panicked by the imminent airport expansion.

Following a number of discussions and revisions to the airport project design, IFC and the Ministry reached agreement, and on 9 July the Minister of Transport and communications presented their proposal to the Council of Ministers for "a phased construction tailored to the need for the capacity to receive large aircraft and meet the demands of the country's national and international growth." A decision required further study of whether the existing runway is strong enough for larger planes, and a revised report is expected to be presented to the Council of Ministers in March 2014.

The 2014 State Budget was approved in February 2014. It includes $5.6 million for design and supervision of Dili Airport development during 2014, and another $253 million for 2015-2018 (see above). As the largest spending will be in 2018, we expect there to be more after that. The budget expects to spend an additional $94 million in borrowed money on the airport during 2015-2018. In addition to the major airport overhaul, the budget also includes $2.5 million during 2015 to rehabilitate the runway.

IFC presented its report to the Council of Ministers describing options for how the Government can engage with private partners to build and/or operate Dili airport. However the Government is discussing another option, working directly with the government of Malaysia rather than with a private partner.


The airport expansion will take place in two stages. Construction will begin in 2015 for the initial stage, which may involve widening the runway and extending it at both ends. This could cut off the 700 people who live in Beto Tasi aldeia from the rest of the world, and one option under consideration would cross the river into Bebonuk. To address Beto residents' concerns, the IFC and the Government are considering ways to maintain community access, such as a bridge over the river, a new road, or a tunnel under the runway.

IFC says that the second phase, extending the runway into the heart of Bebonuk, may be undertaken in future decades, when and if airport traffic justifies it.

 

The Timor-Leste Institute for Development Monitoring and Analysis (La’o Hamutuk)
Institutu Timor-Leste ba Analiza no Monitor ba Dezenvolvimentu
Rua D. Alberto Ricardo, Bebora, Dili, Timor-Leste
P.O. Box 340, Dili, Timor-Leste
Tel: +670-3321040 or +670-77234330
email: 
info@laohamutuk.org    Web: http://www.laohamutuk.org    Blog: laohamutuk.blogspot.com