ASIAN DEVELOPMENT BANK Setting the Scene FDI in Timor-Leste 10 - - PowerPoint PPT Presentation

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ASIAN DEVELOPMENT BANK Setting the Scene FDI in Timor-Leste 10 - - PowerPoint PPT Presentation

Aug 21, 2022 139 likes •263 views

ASIAN DEVELOPMENT BANK Setting the Scene FDI in Timor-Leste 10 December 2019 Foreign Direct Investment in Timor-Leste is lower than in other ASEAN countries FDI as % GDP 10 9 ASEAN-6 CLMV Timor-Leste 8 7 6 5 4 3 2 1 0 2005

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Setting the Scene – FDI in Timor-Leste 10 December 2019

ASIAN DEVELOPMENT BANK

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Foreign Direct Investment in Timor-Leste is lower than in other ASEAN countries

1 2 3 4 5 6 7 8 9 10 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 ASEAN-6 CLMV Timor-Leste

FDI as % GDP

Source: World Development Indicators, 2019

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FDI is closer to the levels seen in other ‘least developed countries’ and ‘fragile and conflict affected situations’

1 2 3 4 5 6 7 8 9 10 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Timor-Leste Least developed countries: UN classification Fragile and conflict affected situations

Source: World Development Indicators, 2019

FDI as % GDP

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Why would an investor come to Timor-Leste?

  • 3. To leverage competitive / cost advantages

But, foreign investors always have other options – lots of competition for FDI

  • 2. To access unique local resources
  • 1. To access the local market
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Open is not the same as easy..

  • On paper, Timor-Leste is very open to foreign investment. Core legal

framework is set by 2017 Private Investment Law and 2018 Implementing Regulations.

  • Key features of investment regime:
  • Strong protection of investor rights
  • Few restrictions on areas for investment
  • Generous tax incentives
  • Dedicated agency (TradeInvest IP for promotion and facilitation)
  • But, doing business in Timor-Leste can be challenging.
  • Small local market
  • Challenges in accessing to factors of production
  • High cost structure
  • Weak business enabling environment
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1 2 3 4 5 6 Institutions Infrastructure Macroeconomic environment Health and primary education Higher education and training Goods market efficiency Labor market efficiency Financial market development Technological readiness Market size Business sophistication Innovation ASEAN-6 ASEAN - CLMV Timor-Leste

Source: World Economic Forum Global Competitiveness Report, 2014-2015

Timor-Leste’s competitiveness lags other ASEAN members in some areas.

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  • 20

20 40 60 80 100

Starting a business Dealing with construction permits Getting electricity Registering Property Getting credit Protecting minority investors Paying taxes Enforcing contracts Trading across borders Resolving insovency Timor-Leste ASEAN 6 ASEAN - CLMV

Source: World Bank Doing Business Indicators 2016

And there are notable weaknesses in the business environment

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Towards a strategy for ↑ FDI

  • 1. Investments to address key constraints / gaps
  • Transport connectivity
  • Skills
  • Utilities
  • 2. Legal and institutional development
  • Property rights
  • Contract enforcement
  • Business regulation
  • 3. Sector focused interventions
  • Tourism
  • Agriculture
  • Oil and gas
  • Others?

But, doing this properly will take time. How can we attract FDI right now? How to integrate the investment promotion strategy?

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Integrating investment promotion and facilitation with the broader development strategy

  • 1. Focus investment promotion to priority sectors
  • Tourism
  • Agriculture
  • Oil and gas
  • Light manufacturing
  • 2. Create very strong focus on investment facilitation
  • Focus on conversion rate – initial interest → completed investment
  • Identify problems, resolve impediments, facilitate

This is fully consistent with the existing legal framework. No big reforms needed, just focus on ACTION

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Thank you