INVESTMENT
Copyright 2006 Mission of Timor- Leste. All Rights Reserved.
Doing Business in Timor-Leste
In today's globalized economy, the competition for the foreign investment is intense. Therefore, creating conditions to attract investment - both national and foreign - constitutes a critical area of the economic policy of the government.
In a study of the World Bank Timor-Leste is one of the most difficult countries of the world to be able register a company. Among 175 countries, Timor-Leste is in 174. We promised to change this immediately and we are in the process of doing that.
In order to make Timor-Leste an attractive destination for international trade and investment, we are taking a series of initiatives to achieve that.
We are concentrating in four areas:
1.simplifying all legislation and administrative processes relating to both domestic and foreign investment;
2.simplifying the tax system and drastically decrease or abolish many of the taxes and duties;
3.establishing insurance to business; and
4.creating a secure environment.
INVESTMENT LEGISLATION
To help the Government with the efforts of changing the investment legislation, the International Financial Corporation (IFC), that sponsors the annual study Doing Business, made one brief analysis to the Code of the Commercial Register (April of 2006) and to the Law On Commercial Societies (n° 4/2004). The IFC assessment suggested some changes to those laws which will improve the ranking of Timor-Leste in respect to the Easiness To start a Business by 98 positions (from 141st to 43rd place), and 11 positions overall.
As a first step, the proposal for alteration to the Law of the Commercial Societies is ready to be presented to the Cabinet and once approved by the National Parliament, we will proceed with changes to the Code of the Commercial Register.
We are also reviewing all legislation dealing with both domestic and foreign investment, including the law that established TradeInvest Timor-Leste so that it can become a true "one stop shop".
Of course, all these proposed changes are being carried out after discussions with the Timor Business Forum and the Association of Small Companies, World Bank, the IMF, among others.
We have also taken further steps to change the attitude of public servants who deal with investors and to simplify procedures to make it easier to invest in Timor-Leste.
Two weeks after my swearing in I met with all the members of the External Investment Commission and instructed its members to establish more efficient procedures to facilitate the investment, particularly changes to reduce the time of approvals, time to clear containers in customs, etc. I also nominated the first Executive National Director of TradeInvest, Dr Noel Carvalho, a Timorese who was an Investment expert, highly respected by his fellow workers and foreign investors who had had contact with him.
In just over three months in office, foreign investors are again showing a keen interest in Timor-Leste and 21 projects worth almost US$80 million and that will create more than 2500 jobs have been fast-tracked for approval. The investors are from Japan, Korea, Australia, Portugal, Kuwait, Singapore, Indonesia and Thailand among others and are developing projects in the areas of tourism, infrastructure, the energy sector, fishing and agriculture.
This compares to 12 projects being approved in the previous 12-month period July 2005 to June 2006.
TAX
The tax system in Timor Leste is a cumbersome combination of the Indonesian, Portuguese and Australian tax systems. At the moment, individuals and corporations are facing eight (8) kinds of different non oil taxes to formally operate legal economic activities in the country.
With oil and gas revenues now coming on-stream, Timor-Leste has a unique opportunity to eliminate costly and inefficient tax practices.
So, we are reviewing income taxes, withholding taxes, import and excise duties, sales tax, service tax, etc. It is my intention to drastically reduce and/or abolish most of the taxes.
Meanwhile, as an immediate relief, the government has decided that all commercial and or industrial activities employing one or more national staff, whose taxes have been paid, will have their electricity bills reduced by 50% for the period between 1st June and 31 December 2006.
INSURANCE
At my instigation we have initiated contacts in order to have insurance for businesses in Timor-Leste.
Either some international company will come here and establish it (there is already some interest from Australia) or, if that is not possible or too expensive, than the government will consider establishing a National Insurance Fund to compensate businesses that may be affected as a result of political upheaval.
SECURITY
There are currently around 1,000 troops from Australia and New Zealand here and this number will prevail until at least December, and beyond if we require them.
As well we will have 1,608 police deployed in Timor-Leste. As of today, we have about 900 UNPOL here. They are in the process of establishing 12 police posts in Dili, whereby some officers can be permanent fixtures in neighbourhood.
So, this should provide a reasonable degree of assurance to businesses that the situation will be peaceful.
Nonetheless, I have made some soundings regarding the possibility of hiring some international security agency - perhaps even gurkas - to maintain security at embassies and businesses.
For Additional Information Regarding Investment Possibilities in Timor-Leste, please contact:
Chris Santos
International Business Adviser
to The Prime Minister
