Timor-Leste’s New Port Signals Economic Expansion Ahead
Private sector investment addresses the nation’s infrastructure deficit and supports sustainable growth.
Less than a year ago, Arnaldo Walter was facing an uncertain future. Timor-Leste was recovering from the worst cyclone to hit the country in 50 years and was in the grip of the COVID-19 pandemic.
On the back of the biggest single investment outside of the oil and gas sector, Arnaldo has a new job and a renewed sense of hope.
Just over 20 years since it regained independence, there are growing signs of progress in Timor-Leste. There is a long way to go - it remains the poorest country in Southeast Asia with almost half its 1.3 million people living in poverty - but Timor-Leste is starting to notch up some significant development gains, with the government’s diversification agenda putting it on a path from fragility to stability.
Arnaldo Walter, linesman at the Tibar Bay Port, is optimistic about the country's future. Photo: Karlis Salna / IFC
Arnaldo Walter, linesman at the Tibar Bay Port, is optimistic about the country's future. Photo: Karlis Salna / IFC
Now, a state-of-the-art port has added to the positive trajectory. The Tibar Bay port, the country’s first public-private partnership (PPP) on the outskirts of the capital Dili has given Timor-Leste a new gateway to the world as well as to lucrative shipping lanes and the potential for more trade, investment, and jobs. One of the biggest single investments the country has ever seen, the port created over 500 jobs during its construction phase with a similar number expected in the future.
Arnaldo is one of the hundreds of people to have now gained a job at the new port. For him, with a story emblematic of many more Timorese and the country’s own recent history, the port is a foundation for economic security and growing prosperity. “With this salary I can support my family,” said Walter, who works as a linesman. “I try to do my best,” he said, adding that he now has a sense of pride and optimism about what the future may hold.
The US$280-million-dollar project just may prove to be a watershed moment for Timor-Leste.
When Timor-Leste regained independence in May 2002, decades of conflict had weakened or destroyed much of the small island nation’s infrastructure. The old port, which ceased operating last year, was plagued with problems, even causing traffic snarls in Dili. It had become a source of frustration and bottlenecks, rather than an incubator of trade and investment.
“It could take weeks to unload and clear containers and there were times ships would turn away because the port was too busy. This added to the uncertainty and cost of doing business in Timor and discouraged investment,” said Timor-Leste Finance Minister, Rui Augusto Gomes.
Timor-Leste’s economy is slowly recovering from the slump caused by COVID-19 and is projected to expand 3% in 2023, according to the World Bank’s latest Economic Update. Still, Gomes said the current economic landscape underscores the need for more revenue streams.
It was back in 2013 that IFC began years of work with the government of Timor- Leste to help turn the concept of a new port into reality. IFC support designed the transaction, enabled legislation for the PPP, helped build capacity to deal with needed contracts and facilitated the tender process to attract investors, while at the same time, helping the government adopt global environmental and social standards for the project.
In parallel, the government worked with the World Bank and other partners on strengthening its institutional capacity in PPP and investment issues, paving the way for financial structuring options for the port PPP at par with international best practice.
The port, built by French transport conglomerate Bolloré after it won a 30-year concession in 2016 to construct and operate the facility, serves as an example of the government’s diversification strategy and its drive to create much-needed jobs. Bolloré invested $150 million in the first stage of construction with the government contributing $130 million in viability gap financing.
“This is a small island economy and trade is very important. Having a modern port will support the development of new export industries related to agriculture and light manufacturing. This is a key part of our overall strategy to diversify the economy,”
- Timor-Leste Finance Minister Rui Augusto Gomes.
Bolloré Chief Executive Officer Laurent Palayer said Timor-Leste’s proximity to international shipping lanes means Tibar Bay is expected to become a regional trans-shipment hub, in turn connecting Timor's economy to the Southeast Asian region and larger economies such as Australia. He said the port looms as a springboard for the entire economy and a catalyst for further foreign investment.
“By constructing and operating a brand-new, fully-fledged port terminal with international standards and state-of-the-art equipment, we think it will help promote industrialization of the country, as well as growth of the economy,” Palayer said. “We also believe that this PPP, which is the first big PPP in the country, will trigger many others to follow.”
Timor-Leste is the smallest economy in Southeast Asia and one of the youngest countries in the world. Despite the receding impact of the pandemic, government spending has not returned to pre-pandemic levels. Combined with the low level of domestic revenue, fiscal sustainability continues to be a major concern, according to the World Bank’s Timor-Leste Economic Report. The Bank warns that the current flow of petroleum revenue is projected to cease in 2023. Without inflows from a new production field or a change in the government’s fiscal policy, the balance is expected to be depleted by 2034.
“The concept of the port was to provide a maritime transport hub for Timor-Leste that would last well into the future,” said IFC Senior Operations Officer Chris Bleakley, who spearheaded the World Bank Group’s involvement in the project. “This port will be good for 50 years or more— it’s been designed so that it can grow as traffic grows,” he said.
He said the project had also shown that the PPP model can work for large projects in developing nations such as Timor-Leste. ”The interesting part is it’s a hybrid blending public funds with private investment, and that model can unlock all kinds of opportunities in other areas to make economically and socially important projects financially viable,” Bleakley said.
“What this project demonstrates is that if we tap into what the private sector has to offer, we really can bring benefits to the people.”
Published in April 2023