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Excerpts from
RDTL Combined Sources Budget and related documents


Presented at May 2004 Timor Leste Development Partners Meeting (Donors' Conference)

Complete draft budget and background paper (PDF)

The RDTL Combined Sources Budget discussed in detail the impact of changes in projected Timor Sea Revenues on East Timor's financing gap, as follows:

In the 2003-04 MYBU and at the December 2003 TLDPM, the Government presented estimates of the medium-term financing gap. The Government committed to searching for measures on expenditure, revenue and asset sales to contribute to filling the financing gap. It also asked development partners for an additional $70 million of assistance through an expanded and extended TSP programme.

Table 2.3 shows how the fiscal gap of $126.3m over 4 years has changed since the 2003-04 MYBU as a result of contributions from: Government responsibilities, including for domestic revenue and expenditure; changes in CFET cash balances; Timor Sea developments; and budget support from development partners.

Table 2.3
Changes in the Fiscal Gap from 2003-04 MYBU to 2004-05 Budget ($m)



2005-06 2006-07 2007-08 4 Yr Total
2003-04 MYBU -20.5   -59.8-46.00.0  -126.3
Total Changes 20.5 39.9 45.5  -9.996.0
   Govt. Responsibilities 10.2 12.4 17.9  0.040.5
   Timor Sea Revenue 8.6 27.5 27.6  -9.953.8
   Development Partners
2004-05 Budget 0.0  -19.9-0.5-9.9-30.3

The Government has made a very significant contribution of $40.5m to closing the 2003-04 MYBU financing gap from policy and administrative measures on domestic revenue and expenditure. This has been achieved by focussing on measures which reduce cost overheads (efficiency savings) but do not impact on services delivered to the community.

The Government’s contribution is almost as large as the contribution of $53.8m from improved Timor Sea developments. While part of this arises from improved compliance with tax laws, most comes from higher world oil prices, improved production volumes and changes in the commencement of depreciation deductions for tax purposes. Higher contributions from development partners arising from greater commitments and exchange rate adjustments have also reduced the fiscal gap by $6.2m. Despite these significant improvements a financing gap of $30.3m remains.

Timor Sea taxation revenues are highly volatile and difficult to forecast. They are influenced by factors beyond the control of Timor-Leste. This leaves Timor-Leste significantly exposed to shifts in its CFET budget. Table 2.4 shows the impact on the CFET fiscal gap as a result of scenario analysis of Timor Sea revenues, using a high case scenario and a low case scenario.

Table 2.4
Fiscal Gap Under Different Scenarios ($m)

 2004-05 2005-06 2006-07 2007-08 4 Yr Total
Budget Estimates 0.0-19.9-0.5-9.9    -30.3
High Case Scenario 10.711.2 33.434.7 90.0
Low Case Scenario -2.8-47.0 -44.4-43.9   -138.1

If the high case scenario for Timor Sea revenues eventuated then there will be no financing gap in any future year and $90.0m would be available for savings or additional expenditure. In this case, the Government would be inclined to save the additional revenue in its petroleum fund and spend any unused budget support on capital and development projects agreed with development partners.

If the low case scenario for Timor Sea revenues eventuates then the financing gap will increase to $138.1m over the next four years. This is well beyond the scope of Timor-Leste’s current resourcing to manage unassisted. This possibility is one of the reasons that Government is requesting an extension of the budget support provided by TSP beyond 2004-05 and into 2005-06 and 2006-07.

The very real possibility that Timor Sea revenues are substantially (over $100m) lower than those contained in the 2004-05 Budget also supports the Government’s strong savings policy. Timor Leste needs to plan to keep sufficient reserves to fund core CFET expenditure against the possibility that Timor Sea revenues could be very low. Table 2.5 shows the Budget estimates of the balance of FTP savings under current policies and the balance of CFET reserves.

Table 2.5
Estimates of Timor-Leste Savings

 2003-42004-05 2005-06 2006-07 2007-08
First Tranche Petroleum Fund  14.0 39.8 67.2 96.5 126.1
CFET Retained Earnings 30.0
Total 44.0 66.9 94.3 123.6 153.2

These reserves would also include any potential to fund spending from petroleum fund savings and concessional loans. While no decisions have yet been taken, this suggests that these options be held in reserve and not used at this stage .

Policy on saving or spending the FTP petroleum savings will be made in the context of the establishment of a petroleum fund. A petroleum fund advisor is expected to provide advice in early 2004-05 and leading to the establishment of the fund in law by the end of 2004-05. Decisions about concessional loans will be made after the Government has received a feasibility study that was requested from the World Bank on IDA loans in September 2003.

As reported in the 2003-04 MYBU, decisions on petroleum savings and concessional loans will also be contingent on the decision by development partners about their contributions to filling the CFET financing gap, whenever these are less costly than other options in regard to public investment.



The Timor Sea revenues are based on many assumptions, including for world oil prices and production quantities. As reported in the 2003-04 MYBU, “the appropriate assumptions to use for forecasting change as new information becomes available and as conditions change”.

For the 2004-05 Budget, the key changes in assumptions have been:


an increase in assumed world oil prices (West Texas Intermediate basis) to an average of about $24 dollars over the rest of the decade (increases revenue estimates);


an increase in production volumes in 2004 from 11.8 mmbl to 15.5 mmbl (increases revenue estimates);


a delay in the commencement of tax depreciation from January 2004 to April 2004 (increases revenue estimates); and


an increase in construction costs largely associated with a weaker US dollar (decreases revenue estimates).

Given that there will be changes to these assumptions in future, scenarios have also been constructed. The high case scenario is based on a world oil price of $28bbl and the “high case” quantity scenario of the project operator that is based upon probable reserves. The low case scenario is based on a world oil price of $22bbl, the “low case” volume scenario of the operator and a closure of the EKKN field in April 2004. Table 2.7 shows the Timor Sea tax revenues in the Budget estimates and also for the high case and low case scenarios.

Table 2.7
Timor Sea Tax Revenues – Scenario Analysis ($m)

 2004-05 2005-06 2006-07 2007-08 4 Yr Total
2004-5 Budget Estimates 18.3 35.2 56.4 47.7 157.6
High Case Scenario 29.0 66.3 90.3 92.3 277.9
Low Case Scenario 15.5  8.112.5 13.7 49.8

The 2004-05 Budget estimates of Timor Sea revenue are for $157.6m over the next four years. However, if the high case scenario eventuates then Timor Sea revenues will be $277.9m. In contrast, if the low case scenario eventuates then Timor Sea revenues will be only $49.8m over the next four years.

There are very large risks to Timor Sea revenues over the next four years. Revenue could be over $100m lower than the 2004-05 Budget estimates or it could be over $100m higher. In addition, these scenarios are not the maximum or minimum for revenue – the variation in revenue could be greater than that shown in the scenarios. For example, the low case scenario is based on an assumed price of $22 per barrel, but oil prices could be much lower – they have varied between $18 and $36 over the last five years and averaged about $19 from 1986 to 1999. Timor-Leste must manage these very large risks by putting in place appropriate policies, such as building up a sufficient level of reserves. Timor-Leste seeks assistance from development partners to enable it to do so.


Relations with Immediate Neighbours

The excellent communications with Indonesia continued during the period, with commitment to good relations at the highest political level on both sides. However, progress on resolving a number of pending bilateral issues has been slow. Some 16,000 former refugees remain in West Timor. Also, a durable solution is yet to be found for the outstanding cases of East Timorese children separated from their families. The target date of 30 November 2003 for the two governments to finalize a provisional border demarcation line was not met, although technical work continued in spite of some logistical and other difficulties. There is a continuing need for communication and dialogue between the security agencies of Timor-Leste and Indonesia to guard against misunderstandings and undesirable unilateral actions.

The first round of negotiations with Australia on the maritime boundaries concluded on 22 April 2004.
Timor-Leste presented significant material in support of its position, but there was little progress. Although Timor-Leste proposed the next round of discussions in May 2004, the Australian delegation preferred to wait until September 2004 to resume the talks. A fair delineation and just distribution of the Timor Sea mineral resources would strengthen the relations between the two countries and contribute to the improved economic well-being of Timor-Leste. Australia, however, continues to promote and emit licences for oil and gas exploration in zones that are situated in areas of overlapping claims and recognised as areas joint exploration by Dili and Canberra



Government continued its efforts, as part of its normal exchanges with the Timor Sea operating companies, to encourage investment by those companies in onshore non-oil and gas sectors. Currently, the petroleum code and the Law of Mineral Exploration are currently being drafted and are in their concluding stages.


Petroleum Fund

During 2004-05, the Government plans to establish a petroleum fund. The fund which will be created
after ample consultation, will be established on the principle of inter generational justice, would go to implement adequate governance provisions for proceeding with investments.

The fund will have to implement adequate governance and policy arrangements for Timor Sea revenue. The Government has been consistent with the principles of the so called “Extractive Industries Transparency Initiative”. The Government anticipates utilising these very same principles after the fund has been created.

The Government is conscious that it will be obliged to divulge completely the effective payments by operators to the Government. The IMF and the Government of the Norway are providing technical support in regard to the establishment of these arrangements In this context, the establishment of the petroleum fund is foreseen in TSP III.



Revenue estimates in the 2004-05 Budget for the next four years show an increase if compared with the 2003-04 MYBU. This expected increase in revenue is due to:


an increase in the market price of oil;


better than expected progress in the development of the Bayu Undan project; and


improved administrative management of the Timor Leste Revenue Service (TLRS), Customs Service and other agencies.

This is against the background of negative implications on the economy of Timor-Leste due to the fact that the UN mission will substantially downsize in 2004 and international support is being withdrawn.

Table 6.1
Timor-Leste Total Revenue 2003-04 MYBU and 2004-05 Budget ($m)

 2003-42004-05 2005-06 2006-07 2007-08
Budget 2004-0552.8 41.3 59.0 81.4 74.3
MYBU 2003-0437.4 29.7 28.2 50.0 na
Change 15.4 11.6 30.8 31.4 na

The aforementioned increase in total revenue for Timor-Leste for the 2004-05 Budget includes First Tranche Petroleum (FTP) and revenue from autonomous agencies, and is compared with the estimates made in the 2003-04 MYBU.

Table 6.2
Timor Leste Total Revenue ($m)

 2003-42004-05 2005-06 2006-07 2007-08
Domestic Revenue (excluding Timor Sea revenue)26.1 23.0 23.8 25.0 26.6
Timor Sea Taxes 26.7 18.3 35.2 56.4 47.7
Total Revenue 52.8 41.3 59.0 81.4 74.3
Memo: FTP & FTP Interest4.6 25.8 27.4  29.329.6
    Autonomous Agencies 6.2  8.310.1 11.1 11.7

The Timor Sea revenue is subject to large risks and Timor-Leste will face challenges in relation to the receipts of revenue. This could mean a reduction in revenue of $100m over the next four years due to risks such as oil prices, quantity of oil production etc. However, revenue could be over $100m higher than the estimates in the 2004-05 Budget if prices and production quantities are high. The magnitude of these effects on Timor Sea revenue is illustrated in the Table 6.3.

Table 6.3
Revenue Estimates for Timor Sea –Sensitivity Analysis ($m)

 2004-05 2005-06 2006-07 2007-08 4 Yr Total
2004-5 Budget Estimates 18.3 35.2 56.4 47.7 157.6
High Case Scenario 29.0 66.3 90.3 92.3 277.9
Low Case Scenario 15.5  8.112.5 13.7 49.8



The methodology used to generate numbers for the Timor Sea revenue estimates for the 2004-05 Budget over the next four years (2004-05 to 2007-08), was to meet with the project operator, in order to get information about their production estimates, and to consider world oil prices and the fall of the exchange rate of the US dollar. Also meetings were held with the Timor Sea Designated Authority, Timor Sea Office and the TLRS in order to analyse the information obtained from the operator to generate estimates that are as accurate as possible. Information given by the operator became an important base for Estimates on Timor-Leste revenue.

The Timor Sea forecasts were updated using the latest information for Bayu Undan from the operator on;


higher oil prices;


revised upstream investment costs;


revised tax on upstream investment;


revised LNG plant investment cost (including changing exchange rates);


revised pipeline investment costs;

Risks to Revenue

Every nation engaging in oil mining will continually face various types of risks and obstacles, especially those countries are themselves dependent on oil production. In relation to this point, the petroleum projects faces the following risks, amongst others.

The world market prices change on a daily basis, or in other words are continually increasing or decreasing, and such large fluctuations in price are expected to influence the amount of Timor Sea revenue received by Timor-Leste.

Chart 6 shows the fluctuations of world oil prices which are continuously changing, thus meaning that there is no certainty in determining an oil price for the Bayu Undan project.

Chart 6.1
World Oil Prices

The Bayu Undan project is a new project, production has just started and until now the price of Bayu Undan condensate and LPG has not yet been established, because it has yet to be sold to a nation in demand. Each refinery seeking to purchase oil and gas has its own tastes and preferences, so the prices for Bayu Undan petroleum are only estimates.

The current exchange rate for the American dollar has weakened against the Australian dollar and Euro. This has impacted on development costs for the Bayu Undan project, as well as operating costs.

Currently, production volumes can only be estimated. It is not yet known for certain how many wells still need to be drilled or the efficiency of the equipment relating to production. Solutions are continually being sought to overcome any problems on the extraction of condensate and LPG from the gas. Currently there is uncertainty about the date for achieving full production, and in addition the operator is hoping that the Bayu Undan project can be completed as soon as possible with no further problems emerging.

Under a self-assessment tax system, tax payers are obliged to interpret the tax law and their interpretation can differ from that of the tax authorities. The regime for tax depreciation has been interpreted differently and work is underway to reach a final agreement between the Timor-Leste Revenue Service (TLRS) and the operator on when to commence tax depreciation.

In the first phase of the project gas is re-injected into the well to maintain reservoir pressures and maximize the extraction of condensate and LPG. The extent to which this will be successful is unknown. This will influence the production of condensate and LPG, including during the second phase of the project when gas is delivered to Darwin by the pipeline from 2006.

The estimation methodology has adopted a discount of 15% for revenue from the Timor Sea, in order to provide a degree of security (but not certainty) that the revenue estimates will be obtained, given all of these risks. The 2004-05 Budget estimates of Timor Sea revenue will almost certainly be revised in the 2004-05 MYBU as new information becomes available.

Revisions to 2003-2004 Estimates

The risks described above are illustrated by the revisions to the estimate for 2003-04. Estimates in the 2003-04 MYBU predicted total revenue from the Timor Sea taxation to be $17.1 m. However in the revised estimates for the annual 2004-05 Budget Timor Sea revenue has increased significantly with a total estimate of $26.7 m, or in other words an increase of $9.6 m. This large increase in the estimates is based on high collections of $12.3m in the month of March 2004.

This increase can be attributed to the TLRS continuing to improve its compliance and enforcement and provide guidance on tax laws to tax payers resulting in more tax payers adhering to tax regulations and paying an extra $3.4m. The TLRS and a tax payer previously held conflicting views, but settlement of a dispute has now increased revenue by $3.2m. The increase in production for Elang Kakatua Kakatua North (EKKN) totals $1.9m because of higher world oil prices. Decisive collection action on once-off exploration of Kuda Tasi has provided total revenue of $1m.

Budget Forecast and Scenario

Timor Sea revenue estimates for the 2004-05 Budget are significantly increased in comparison with the 2003-04 MYBU. This expected increase can be attributed to several important factors which include, amongst others, world oil prices, expected production developments, the start date of tax depreciation and higher investment costs.

World oil prices continually fluctuate and this fluctuation impacts both positively and negatively on any nation which is particularly dependent on oil, such as Timor-Leste. Information obtained on New York Mercantile Exchange (NYMEX) quotations relating to the next five years suggests world oil prices will decline to 2008.

Based on this information there is an assumption that over the next five years world oil prices will decline, and then from 2009 will experience an increase of 2.5% per annum. Oil price assumptions based on a 2 year average of world oil prices from NYMEX are:


2004 $25.41


2005 $24.03


2006 $23.49


2007 $23.35


2008 $23.26


2009 $24.43 (Thereafter increasing 2.5% per annum).

The operator reports better than expected progress of activities relating to the expected production of Bayu Undan, where first liquids were extracted in February 2004. The Production for 2004 is now estimated to reach 15.5 million barrels, which is an increase on the figure of 11.8 million in the MYBU. The tax depreciation for the Bayu Undan project is expected to commence later, though a general agreement has not yet been reached between the TLRS and tax payers.

Investment costs for the Bayu Undan Project are higher because the American dollar has weakened against the Australian and Euro currencies. This reduces revenue and is a partial offset to the three factors mentioned previously.

Table 6.6
Timor Sea Revenues ($m)

 2003-42004-05 2005-06 2006-07 2007-08
VAT12.1 8.2 4.6 6.6 4.1
Income Tax14.6 10.1 30.6 49.9 43.6
Total Tax 26.7 18.3 35.2 56.4 47.7

Estimates in the annual 2004-05 Budget for value added tax (VAT) from investors over the next few years is expected to decline, as the volume of investment activities for Bayu Undan is completed. Income tax is yet to display signs of an increase as production on the Bayu Undan Project has only just begun. At this stage the product of Bayu Undan has not yet been sold on international markets. In addition, tax depreciation will significantly reduce taxable income for the next five years. The EKKN project is expected to experience a decline in production for the current year and next year and cease its production in 2006.

Income Tax is expected to experience an increase in revenue for 2005 caused by Bayu Undan starting to achieve its full production and being sold to the international market. Income tax collections are therefore expected to rise. They will also rise when the pipeline commences operations. The large effect of the risks and uncertainties on Timor Sea revenue estimates is best illustrated by scenarios.

The high case scenario and low case scenario are based on better or worse outlooks than the assumptions used for the budget estimates. From the start of 2000, world oil prices (West Texas Intermediate) on the international market have ranged between about $18 and about $36 per barrel. For the previous period between 1986 and 1999 the average price was about $19 per barrel. This can provide reference points for the current status of world oil prices. The revenue of Timor-Leste could be higher than that indicated in the high case scenario, or could be lower than that illustrated in the low case scenario.

There are several scenarios for revenue from Bayu Undan, namely the:


high case scenario;


low case scenario; and


the 2004-05 Budget scenario.

These scenarios are based on variations in prices and quantities, where the price variations are only illustrative. Scenarios have been constructed as an illustration to show the effects of this range of world oil prices and changes in production volumes on Timor Sea revenue estimates.

In the estimates of the 2004-05 Budget, the budget base scenario was constructed on the basis of declining world oil prices as described above.

The high case scenario uses an assumption of a world oil price of $28 per barrel. It also uses an assumption that reservoir volumes are higher than the budget assumption and are at the operator’s estimate of probable (P50) reserves. This high case scenario would provide considerable revenue for Timor-Leste. Based on this estimate, if the world oil price remains stable at $28 per barrel, then the revenue of Timor-Leste for the next four years would be $120.3m higher than the budget estimate.

The low case scenario uses an assumption of a world oil price of $22 per barrel. It also uses an assumption that reservoir volumes are at the operator’s pessimistic assessment of proven reserves. In addition, EKKN is assumed to close early. This low case scenario would provide considerable challenges for Timor-Leste. If world oil prices declined to $22 per barrel then a reduction of $107.8m in revenue relative to the budget estimates would occur.

The aforementioned scenarios are used as an illustration for Timor-Leste to understand the range of possibilities. Actual collections could be inside this range, or higher or lower.

Chart 6.2 and Table 6.2 (sic) shows the 2004-05 Budget estimates of the long term outlook for Bayu Undan revenues. These have not been discounted and include revenue from FTP. Revenues originating from the Bayu Undan Field will remain the largest portion of total Timor Sea revenue. This chart shows that longterm Bayu Undan revenue estimates have not changed much since the 2003-04 MYBU.

Chart 6.2
Bayu Undan Revenue 2004 to 2023

Table 6.7
Bayu Undan Revenue 2004 to 2023 ($USm)


2003-04 MYBU2004-05 Budget


25 30


































133 114


28 27


10 10


The Government of Timor-Leste has adopted a policy to save all First Tranche Petroleum (FTP), which is the royalty component of Timor Sea revenue. The policy aims to secure savings for development in the future. This policy was implemented several years ago, and the latest estimates are shown in Table 6.8.

Table 6.8
FTP and savings from FTP ($m)

 2003-42004-05 2005-06 2006-07 2007-08
FTP4.5 25.5 26.126.9  25.9
Interest0.1 0.3 1.3 2.4 3.7
Balance of FTP & Interest14.039.8 67.2 96.5  126.1

Higher oil prices and the faster than expected development of Bayu Undan will contribute to a higher level of revenue for FTP from the Timor Sea for the Timor-Leste Government in the 2004-05 Budget compared to the 2003-04 MYBU. Interest generated by the FTP savings from the Timor Sea are expected to increase due to an increase in FTP savings. Also the bank interest is expected to increase annually.

Estimates indicate that savings accumulated from the FTP at the end of 2006-07 will reach $96.3m, in comparison with the 2003-04 MYBU of $91.6m. It is likely that Timor-Leste will have fluctuations in revenue. Timor-Leste could use its FTP savings to maintain desired levels of Government spending at some future time.

horizontal rule

horizontal rule


Draft FY2005 Action Matrix for Third Transition Support Program (TSP-III)

Program Components
(NDP Goals, Ministry AAP)
Expected Outputs and Outcomes
Performance Indicators and Targets
Expected Outcomes
Agency/Donor ResponsibleAchieved by 30 Sept 2004Achieved by 31 Dec 2004Achieved by 31 March 2005Achieved by 30 June 2005
A.1.4 Effectively manage oil and gas revenues and savings to benefit present and future generations
(NDP pages 7, 24, 30, 67, 78-79, 89-91, 213)
Draft Petroleum Fund Law, saving policy Petroleum Fund established, savings policy implementedPMO, TSO Draft Petroleum Fund and savings policy published and consultations launched Draft Petroleum Fund Law submitted to Parliament
EITI plan and report  Reporting to EITI standardsPMO, TSO  Assessment of progress on EITI in 2004 and implemen-tation plans 


12. Two years into Timor-Leste’s existence the Government clearly emerges as the country’s strongest institution. It has established core planning and resource management functions that are effective and transparent, and compare very favorably with those of other low income countries. Prominently, and consistent with world-wide best practice, the Government has adopted a transparent savings rule for oil and gas revenues, and has consistently applied this rule (Box 2). A more permanent rule will be established in the context of the Petroleum Fund Law which is under preparation. Yet the system is vulnerable in the face of decreases in international advisors, as indicated by a recent assessment of the Ministry of Planning and Finance, and will need to be supported by continuous institution building efforts to enhance the credibility and sustainability of rules and practices.

Box 2: Ensuring Prudent Governance of Timor Sea Revenues

Over the next two decades, Timor-Leste stands to gain between US$ 4 and 12 billion in oil and gas revenues from the Timor Sea, including a projected US$ 120 million in the next three fiscal years. Though this expected windfall will provide a much needed boost to the resource pool from which Government can fund critical development initiatives, it poses an important set of governance challenges.

International experience suggests that countries rich in natural resources are particularly susceptible to wasteful spending and corruption, as evidenced by consistently lower performance in growth and poverty reduction as compared to resource-poor nations. The concentration of resources in one sector creates opportunities for rent-seeking and irregular payments, and thus diverts public funds from service delivery and investment spending. Large natural resource rents tend to weaken accountability to taxpayers, especially when the tax base is small as in Timor-Leste and when non-petroleum taxes are a relatively small part of revenues. The relative abundance of financial resources can encourage governments to overspend, and to spend in areas that would otherwise be deemed inefficient. Despite the political difficulty of setting aside savings in the face of budget requests, it is critical for leaders to recognize the importance of ensuring the sustainability of financing for future generations. This is certainly the case in Timor-Leste, as revenues from current petroleum fields are expected to last for only 20 years.

In response to these potential governance pitfalls, Timor-Leste has taken several important steps to promote prudent management of its natural resource revenues. Current savings policies are consistent with principles of international good practice:

  1. A substantial portion of Timor-Sea revenues , i.e. the royalties and the investment income derived from the royalties, are saved for future generations.

  2. Timor Sea revenues are integrated into the budget process. Savings are held in Government accounts, expenditures are executed through the Treasury, and transactions are reported as part of the Government’s consolidated reporting.

  3. Assets are managed prudently in safe, offshore investments that are sheltered from domestic economic risks.

  4. Governance mechanisms have been put in place to ensure transparency and accountability in the use of funds. Revenue and expenditure figures are publicly available, and the Budget Law and regular external audits guard against the misappropriation of funds. Moreover, the Government of Timor-Leste has commendably agreed to participate in the Extractive Industries Transparency Initiative (EITI), launched in 2002 to encourage governments as well as oil and gas companies to share information on natural resource revenues and payments.

Building upon these good practices, the Government has developed a draft Petroleum Fund Law which will lay out sustainable management of petroleum revenues over the long term. It will be important that the underlying savings policy be subject to broad public consultations and that the design of the Fund benefit from the feedback of the Timorese citizens, to whom the petroleum resources ultimately belong. A March 2004 workshop on Transparency and Accountability in the Governance of the Oil Sector, hosted by an NGO, opened by the President and featuring presentations by the Government, is a useful step in this process. It is important to note, however, that the existence of a Petroleum Fund is not in itself a solution to the potential problems arising from the influx of Timor Sea revenues; a well-functioning public expenditure management system must also be in place to enforce the efficient and appropriate use of funds.

Source: “East Timor: Policy Challenges for a New Nation.” Country Economic Memorandum. World Bank, 2002.

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
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