HomeReportsBureau of Economic and Business Affairs2023 Investment Climate Statements...Timor-Leste

# 					2023 Investment Climate Statements: Timor-Leste			

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													EXECUTIVE SUMMARY											

                -  EXECUTIVE SUMMARY 
                -  1. Openness To, and Restrictions Upon, Foreign Investment                    -  Policies Towards Foreign Direct Investment 
                  -  Limits on Foreign Control and Right to Private Ownership and Establishment 
                  -  Other Investment Policy Reviews 
                  -  Civil Society 
                  -  Business Facilitation 
                  -  Outward Investment 
                -  2. Bilateral Investment and Taxation Treaties 
                -  3. Legal Regime                    -  Transparency of the Regulatory System 
                  -  International Regulatory Considerations 
                  -  Legal System and Judicial Independence 
                  -  Laws and Regulations on Foreign Direct Investment 
                  -  Competition and Antitrust Laws 
                  -  Expropriation and Compensation 
                  -  Dispute Settlement                      -  ICSID Convention and New York Convention 
                    -  Investor-State Dispute Settlement 
                    -  International Commercial Arbitration and Foreign Courts 
                  -  Bankruptcy Regulations 
                -  4. Industrial Policies                    -  Investment Incentives 
                  -  Foreign Trade Zones/Free Ports/Trade Facilitation 
                  -  Performance and Data Localization Requirements 
                -  5. Protection of Property Rights                    -  Real Property 
                  -  Intellectual Property Rights 
                -  6. Financial Sector                    -  Capital Markets and Portfolio Investment 
                  -  Money and Banking System 
                  -  Foreign Exchange and Remittances                      -  Foreign Exchange 
                    -  Remittance Policies 
                  -  Sovereign Wealth Funds 
                -  7. State-Owned Enterprises                    -  Privatization Program 
                -  8. Responsible Business Conduct                    -  Additional Resources 
                  -  Climate Issues 
                -  9. Corruption                    -  Resources to Report Corruption 
                -  10. Political and Security Environment 
                -  11. Labor Policies and Practices 
                -  12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs 
                -  13. Foreign Direct Investment Statistics 
                -  14. Contact for More Information 

## EXECUTIVE SUMMARY

The Government of Timor-Leste has welcomed foreign-investment and business-development opportunities since gaining independence in 2002. In practice the investment climate continues to be hampered by inadequate regulatory mechanisms, corruption, insufficient personnel capacity, and deficient infrastructure. The government is working to address these issues but limited human capacity and a time-consuming bureaucratic/legislative system has made progress on reform slow. Initially plagued by conflict and turmoil after independence, Timor-Leste has emerged as a peaceful and stable democracy. Peaceful changes of government and freely contested elections, including a 2022 presidential election that drew 16 candidates, demonstrated an active political climate with competing views for how to best develop an economy largely dependent on public-sector spending for growth. Timor-Leste’s desire to join the Association of Southeast Asian Nations (ASEAN) and the World Trade Organization (WTO) provides incentive to implement fiscal and economic reforms to meet regional and international norms.

After rebounding in 2021 to grow 2.9%, Timor-Leste’s economy continued to recover in 2022, growing by 3.0%. Nevertheless, per capita GDP remains below pre-pandemic levels. Timor-Leste’s private sector is weak and primarily dependent on government contracts, and the government’s

 

							1. Openness To, and Restrictions Upon, Foreign Investment					

### Policies Towards Foreign Direct Investment

Timor-Leste welcomes and strives to attract Foreign Direct Investment (FDI). The government has made considerable effort to establish effective legislative, executive, and judicial institutions, draft laws and regulations, and build personnel capacity. In 2011, parliament unanimously approved the government’s National Strategic Development Plan. The plan directs petroleum revenues to support non-petroleum economic development and help the country move to become a middle-income country by 2030. Despite its openness to FDI and efforts to improve the enabling environment, Timor-Leste’s legal, regulatory, and human capacity remain weak and continue to present challenges for investors.

TradeInvest Timor-Leste, I.P. is Timor-Leste’s investment and export promotion agency. The organization’s goal is to facilitate and support potential investors in the country and assist foreign companies in identifying projects among the limited business opportunities emerging in Timor-Leste. TradeInvest is a one-stop-shop that provides services such as licensing, taxes, investment opportunities, permits, tariffs, and educating importers on correct procedures and policies. TradeInvest also provides post-investment aftercare services. The agency’s official website is www.tradeinvest.tl.

The government has no regular structures or activities intended to maintain engagement with investors.

There are no laws or practices in the country that U.S. investors allege discriminate against foreign investors by prohibiting, limiting, or conditioning foreign investment in a sector of the economy. However, under the constitution, only citizens may own land. Timor-Leste enacted laws in 2017 and 2018 to facilitate and protect foreign private investment by adhering to international agreements and reducing bureaucratic hurdles. Private Investment Law No. 15/2017 states that foreigners can be granted the right to private property for investment and reinvestment projects subject to the limits set out in the Constitution and in legislation on land and commercial companies.

The government views building international ties as part of its effort to increase foreign direct investment opportunities. In 2022 ASEAN member states granted Timor-Leste observer status and agreed in principle to approve its application for ASEAN member ship. Timor-Leste has been active in the Community of Portuguese Speaking Countries and served as President from 2014-2016. (A Timorese citizen has served as Executive Secretary of the Community of Portuguese Speaking Countries since July 2021.) Timor-Leste is also pursuing WTO accession, and also pursuing trilateral economic cooperation opportunities with Indonesia and Australia to boost cross-country investment.

The government’s Strategic Development Plan highlights key investment areas to include oil and gas, forestry and livestock, fisheries, tourism, energy, infrastructure, civil construction, coffee, spices, and transportation.

The government, through its autonomous agency, the National Petroleum and Minerals Authority (ANPM), contracts with foreign firms to explore and develop offshore oil and gas deposits. Pre-qualification for Timor-Leste’s second licensing round of 11 onshore and 7 offshore blocks closed on January 14, 2022. Thirteen companies submitted bid documents. Bid results were announced April 22, 2022, with five blocks awarded. ANPM has also hosted annual Oil, Gas, and Energy Summits for four years to attract international investors to the oil and gas industry in Timor-Leste, collectively drawing virtual and in-person attendance from over 350 participants from nearly 225 companies. The 2022 summit was held in Dili in June.

The government deposits oil and gas revenues into the Petroleum Fund, a sovereign wealth fund. Investment income represents the majority of fund income with revenues from oil and gas currently a relatively small share of income. Strong recovery of global oil prices in 2021, however, reaching historic highs in early 2022 has bolstered revenue from depleting production. The fund value has experienced considerable fluctuation as the COVID-19 pandemic impacted global financial markets. Government expenditures, including efforts to combat COVID-19, rely heavily on the fund. Business and individual tax collections comprise less than 10% of GOTL operating revenues.

Government spending, coffee exports, subsistence agriculture, remittances from workers abroad, and small-scale retail activities are the other sources of employment and economic drivers. On March 21, 2023, the Government of Timor-Leste, through the National Petroleum and Minerals Authority (ANPM), launched its first licensing round for mineral exploration, offering a total of 49 concession areas for investment. No mineral extraction currently takes place in the country.

### Limits on Foreign Control and Right to Private Ownership and Establishment

By law, foreign investors may invest in any sector other than postal services, public communications, transportation, protected natural areas, funeral services, and weapons production and distribution, as these are specifically reserved for the state. Investors are also prohibited from investing in sectors otherwise restricted by law. In areas where foreign investment is permitted there are no limits on the level of foreign ownership or control. There have been no changes to the legal regime in the past year. However, in practice, foreign companies have significant holdings in reserved sectors. For example, Brazilian, Indonesian, Vietnamese, and Chinese investors control large shares of the country’s three telecommunications providers.

Section 54 of Timor-Leste’s constitution grants the right of land ownership exclusively to Timorese nationals, either individuals or corporate entities; however, foreigners may conclude long-term (up to 50-year) leases. Investors who wish to lease property must often sort through competing claims from the Portuguese colonial administration, the Indonesian occupation era, and the post-independence period. Resolution may be delayed for years.

TradeInvest reviews foreign investment applications which are then presented to the Private Investment Commission for further study and evaluation. The Executive Director of TradeInvest chairs the Private Investment Commission, which is composed of directors general or equivalent from the relevant government ministries in the areas of taxation, customs, land and properties, economic activities of licensing, professional training, labor, immigration, building and housing, territorial planning, and the environment. Other ad-hoc members may also be called upon to be present during the meeting. Prospective investments are reviewed for their economic cost and benefits as well as for the capacity of the investor.

The Private Investment Commission evaluates applications for foreign investment permits, verifying the following:

- Compliance of the application with requirements established in the National Development Plan, in the Procedural Regulation for Foreign Investment and other applicable legislation.
- Suitability, capacity, experience, and availability of financial resources necessary for implementation and operation of the proposed investment enterprise.
- Capacity, experience, and business or technical characteristics of the promoter or its managers in order to guarantee implementation and operation of the enterprise.
- Positive operational balance of the business, according to the project proposal.
- Environmental, infrastructural, and social implications which could condition the viability of the enterprise or that can result from its implementation.
- Guaranteeing availability of necessary land for installation and functioning of the investment enterprise.
- Ensuring consistency of the expected new jobs to be created in the short and medium term.
- Establishing interconnection with other economic sectors.

The documents required for investments include:

- TradeInvest application form
- Descriptive project summary (project briefs, technical plans)
- Identification of promoters, professional CV/Firm Corporate Capability
- Bank credentials (bank statement, bank reference)
- Business plan
- Documents of Land Ownership
- Lot location
- Budget for construction/remodeling
- Environmental Impact Assessment (Environmental Licensing)
- Criminal Records (Original/Certified copy)

TradeInvest can issue a certificate of investment for projects approved by the Private Investment Commission valued at less than $20 million. Investments of more than $20 million or that require more than 5 hectares of state land for tourism or 100 hectares of state land for agriculture, livestock, or forestry require approval from the Council of Ministers. Investors can also request a Special Investment Agreement, through TradeInvest, prior to submitting the project to the Council of Ministers for approval. The TradeInvest website reports that application fees are $500 for national investors and $2,000 for international investors. TradeInvest should issue investment decisions within 30 days. Regulatory actions needing approval from the Council of Ministers may require additional time to resolve.

After nearly a decade, the government granted a foreign company the rights to invest an initial $100 million to develop 16 hectares into an upscale resort just west of the capital in March 2020. In January 2022, the Council of Ministers approved a Special Investment Agreement (SIA) for the development that had been pending since 2010. Timor Port, a $490 million project developed as the country’s first Public Private Partnership was completed and began operating in September 2022. Another multi-million-dollar large-scale investments in a cement plant in Baucau is yet to open, having been delayed by COVID-19 and opaque government processes.

### Other Investment Policy Reviews

Timor-Leste has not yet conducted any investment policy reviews through OECD, WTO, or UNCTAD. Timor-Leste was accepted as an observer to the WTO in 2016, and its Working Party for accession to the WTO was established in December 2016 and held meeting in October 2020, July 2021, April 2022, and September 2022. In May of 2022, the Coordinating Minister for Economic Affairs and WTO Accession Chief Negotiator led a large government delegation in bilateral meetings with WTO members, the WTO Secretariat and development partners in Geneva. Timor-Leste’s overall political stability has allowed some businesses to grow; political impasses, during which the country operated without state budgets, however, reduced opportunities for government contracts in 2017, 2018, and 2020. The political impasses affected many areas of the economy, including commerce, public services, and larger public works projects. The government passed its 2021, 2022, and 2023 state budgets on time in December prior to the start of the respective fiscal year (January – December).

In March 2020, the government enacted a State of Emergency (SOE) to respond to the COVID-19 pandemic and restricted many “non-essential” commercial enterprises. In November 2021, the government passed amendments to the Health Law that allowed it to implement public health measures previously only possible under an SOE, and the last SOE expired. In August 2020, the government released a plan to promote Timor-Leste’s post-COVID-19 economic recovery, including short-, medium-, and long-term interventions. The plan includes support to the private sector as well as to households and local producers. The food subsidy program (*Cesta**B**á**sica*) introduced with the plan continued to be implemented with the 2023 state budget.

Although the government is committed to improving its services in critical sectors, challenges remain – bureaucratic inefficiency, infrastructure bottlenecks, the absence of real property and information communications technology (ICT) laws and other essential legislation, a lack of commercial courts, uncertain implementation of government procedures, significant deficiencies in human capacity, conflicts of interest, and corruption are some of the most notable challenges.

### Civil Society

Timor-Leste has not been the subject of investment policy reviews by domestic or third country civil society groups.

### Business Facilitation

Timor-Leste’s Business Verification and Registration Service office (SERVE) processes business registration and licensing in the country. SERVE was created in 2013 as one-stop-shop to make business registration faster and easier. The agency’s website is https://serve.gov.tl. Business registration and application processes require an in-person visit to SERVE’s office. Getting a business license takes between one and five days; however, actual timelines may be greater. For companies involved in civil construction, food processing, or pharmaceutical industries, the agency works closely with relevant ministries, particularly the Ministry of Tourism, Commerce, and Industry, to facilitate business licenses, although since 2017 all registration requirements have been centralized with SERVE.

Monthly and annual tax declarations can be made online at https://attl.gov.tl/.

### Outward Investment

The government does not promote or incentivize outward investment, nor does it restrict it.

							2. Bilateral Investment and Taxation Treaties					

Timor-Leste and Portugal have signed an Agreement on Mutual Protection and Promotion of Investment. Timor-Leste signed a Bilateral Investment Treaty (BIT) with Germany in 2005 and with Qatar in 2012 but neither is yet in force. Timor-Leste does not have a BIT or a bilateral taxation treaty with the United States. Timor-Leste has a tax treaty with Portugal only.

Timor-Leste is not a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting.

							3. Legal Regime					

### Transparency of the Regulatory System

Timor-Leste’s regulatory system is still in formative stages. Existing tax, labor, environment, health and safety, and other laws and policies do not present obvious impediments to investment. Government policies and practices generally are transparent.

The Ministry of Finance launched an online Procurement Portal in 2011, intended to increase transparency by providing equal access to information on government tenders and procurement contracts. However, updates are inconsistent and not all tenders appear to be included in the site. Reports say when tenders are posted, it is only for a few days and winners may be pre-selected. The Audit Chamber, under the Court of Appeals, is responsible for reviewing government procurements above $5 million.

In 2018 and 2019, the Ministry of Finance launched the ASYCUDA system in APORTIL, the organization managing customs at the international port and International Airport of Nicolao Lobato, as part of the fiscal reform process with the aim of improving efficiency, customer service, and transparency. The government hopes to facilitate trade by implementing a modern and reliable system to track and manage imports and exports. USAID’s Customs Reform Project helped Timor-Leste’s Customs Authority to streamline processes, improve government-wide integration, and align with laws and international standards. The project also established a National Customs Hotline for reporting illegal activities and an online Customs Trade portal providing the public with trade-related information, improving transparency for import/export procedures. In May 2021, Timor-Leste’s Customs Authority launched a Customs Hotline, allowing anyone to anonymously report by phone or online possible customs infractions. This and similar international programming help the GOTL reduce trade costs by adopting best-practice customs clearance and transit procedures.

In addition, SERVE issues no-cost business licenses for what it determines to be low-risk undertakings. High- and medium-risk business licenses may incur application fees. Initial and renewal business license are generally valid for 12 months. SERVE also supports the private sector’s compliance with mandatory social security contribution laws.

Parliament and parliamentary committees regularly hold hearings and debates on proposed laws. For certain major legislation, the government holds limited public consultations or solicits public comment. Public health protocols reduced public consultations during the COVID-19 pandemic, but with a gradual lifting of restrictions following expiration of the last state of emergency in November 2021 public consultation activity returned to normal by Q1 2023. There is no legal requirement to publish draft regulations prior to enactment. Relevant functional agencies generally are responsible for formulating regulations, which are then presented by the parent Ministry for consideration and approval by the Council of Ministers.

Regulations are adopted and implemented at the national level; there are no sub-national levels of regulation. Most oversight occurs in the capital by relevant ministries, although some agencies have staff at the district level that monitor compliance. Legislation and regulations are published in the national journal (*Jornal**da República de Timor-Leste,*www.mj.gov.tl/jornal/), in full text, to signify entry into force, although applicable information may be tardily printed or difficult to find.

Public finances and debt obligations are published and available to the public. Financial reports available through internet-based access are not consistently updated, but they are generally made available upon request.

Government encourages businesses to engage in good corporate social responsibility practices, although this effort is only codified in the oil and gas sector. The Petroleum Act of 2005 includes a local content regulation that requires applicants for production sharing contracts to include proposals for environmental protection, health and safety, and training and preferential employment of Timor-Leste nationals.

### International Regulatory Considerations

Reforms currently underway in Timor-Leste’s fiscal and economic systems aim to bring the country into compliance with ASEAN and WTO standards. The Timor-Leste ASEAN Mobilization Plan (TLAMP) aims to bring all the relevant line ministries into compliance with ASEAN economic best practices.

Timor-Leste was accepted as an observer to the WTO in 2016, and its Working Party for accession was established in December 2016. The fourth meeting of the Working Party was held in September 2022. A Timor-Leste government delegation visited Geneva in May 2022 for bilateral meetings with WTO members and the WTO Secretariat and participated in roundtable discussions on the country’s WTO accession.

### Legal System and Judicial Independence

The Portuguese legal system heavily influences Timor-Leste’s civil law system. Timor-Leste applies Indonesian law, which was in force until August 1999, as a subsidiary source of law for issues not yet addressed in Timorese legislation. The country does not have a written commercial code. The judicial system operates independently of the executive but is evolving and short staffed. Regulations and enforcement actions can be appealed to the court system.

The Office of the Prosecutor General continues to accumulate experience and capacity to establish and implement case management and other essential systems. Timor-Leste has courts of first instance and a court of appeal. However, courts operate in only four of the country’s thirteen districts, and customary law governs most cases at the local level. Additional courts outlined in the Constitution and law, such as specialized tax courts, have not yet been established. Waiting times to bring a case before a judge remain long, and cases may be unresolved for years. Conciliation and arbitration judicial reforms to reduce pending caseloads are preliminary. In practice, the system generally prioritizes criminal cases.

### Laws and Regulations on Foreign Direct Investment

The Timorese legal system is based on a mix of Indonesian laws and regulations, acts passed by the United Nations Transitional Administration, and post-independence Timorese legislation modeled on Portuguese civil law. The country is reviewing its legislation to harmonize the system but has yet to undergo a comprehensive overhaul of the overlapping yet disparate systems. Timor-Leste has two official languages (Tetum and Portuguese) and two working languages (Indonesian and English); all new legislation is enacted in Portuguese and is based on the civil law tradition, though is supposed to be published in Tetum as well.

The Private Investment Law (Law No. 15/2017) specifies the conditions and incentives for both domestic and foreign investment and guarantees full equality before the law for international investors. Other major laws affecting incoming foreign investment include the Companies Code of 2004, the Commercial Registration Code, the Taxation Act of 2008, and the Copyright Law of 2022. The Government of Timor-Leste announced the establishment of TradeInvest, a one-stop-shop for investment and export promotion in 2015 (https://www.tradeinvest.tl/). The agency has the responsibility to promote Timorese exports and investment opportunities in the country and to encourage domestic entrepreneurship. There are ongoing fiscal reform efforts designed to align Timorese legislation and regulation with best practices in ASEAN (under the ASEAN Comprehensive Investment Agreement) and under the United Nations Conference on Trade and Development (UNCTAD).

### Competition and Antitrust Laws

Timor-Leste does not have a competition or anti-trust law.

### Expropriation and Compensation

Both Article 54 of the Constitution and the Private Investment Law permit the expropriation or requisition of private property in the public interest only if just proper compensation is paid to the investor. The Private Investment Law calls for the equal treatment of foreign and national investors in expropriation cases and prohibits nationalization policies or land policies that deliberately target the property of investors.

The government has relocated significant numbers of residents for large development projects in Oecusse and Suai. Two known private investments in Dili have negotiated with the government to remove residents as part of the investment agreement. Residential relocations can often be contentious; a large-scale hospitality development close to the capital is a cautionary example of unregistered tenets establishing domiciles on claimed property of a private investor and demanding compensation from the corporation or government before vacating, and all parties are outwardly refusing to relocate, compensate, or compromise. The government has not used methods that could be considered indirect expropriation. The government has at times been accused of not offering fair market value as compensation for expropriations, or for not following due process for evictions of squatters on government or disputed land.

### Dispute Settlement

#### ICSID Convention and New York Convention

Timor-Leste is a member state to the International Centre for Settlement of Investment Disputes (ICSID Convention). In February 2021, parliament ratified the convention of the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). Law No 6/2021, of March 31, 2021, approved the legal framework for voluntary arbitration. The new regime applies to all arbitration proceedings based in Timor-Leste, whether domestic or international, as well as the confirmation and enforcement of arbitral awards rendered in another country, without prejudice to the provisions of international conventions. The Voluntary Arbitration Acts follows the systematic structure and principles of the UNCITRAL Model Law on International Commercial Arbitration of 1985, as amended in 2006, and entered into force the day after its publication.

#### Investor-State Dispute Settlement

The domestic court system handles civil disputes but is not properly equipped for the demands currently placed upon it. The Timorese justice system suffers from a shortage of qualified judges and attorneys, incomplete and piecemeal national legislation, and insufficient geographical coverage. New legislation is enacted in Portuguese, while many legislators, prosecutors, judges, attorneys, police officers, plaintiffs, and defendants do not speak the language. Legal professionals lack specialized technical expertise to address complicated commercial or tax cases. Local courts recognize foreign arbitral awards against the government. Timor-Leste is not signatory to any treaties or investment agreements that provide for binding arbitration of investment disputes. There is no history of extrajudicial action against investors.

The government pursued international arbitration against at least one private company in a tax dispute. There were four cases filed against the company in Singapore in arbitration in 2014. After more than a year of process, both sides signed a negotiated agreement in February 2016 that resolved most of the pending cases.

In 2019, an Australian company pursued arbitration against the government for alleged breaches and unlawful rejection of a fuel supply contract. The case went before the Supreme Court of Victoria, Australia, and was resolved in favor of the government in October 2020.

In 2018, overseas arbitration led to a $5 million settlement in favor of a private Spanish construction firm for late payment by the GOTL on a road project in 2018. This is the only known example of a private-sector actor receiving compensation for losses determined to be the fault of the GOTL.

In 2016, a U.S. company and the government of Timor-Leste settled several significant outstanding disputes regarding tax assessments. The parties were unable to resolve a further dispute regarding a withholding tax but agreed to leave the matter with the Singapore International Arbitration Center and accepted the result. The parties also agreed on a shared understanding of the relevant dispute resolution framework and application of penalties, and an agreement to work together towards consolidating the applicable tax laws.

#### International Commercial Arbitration and Foreign Courts

The domestic court system is not properly equipped to handle commercial or tax disputes, and most legal professionals lack specialized expertise or training in these types of cases. There is no domestic arbitration body in Timor-Leste. Legal dispute resolution rarely takes place in Timor-Leste and established private sector actors tend to travel to Singapore or Australia for arbitration. Local courts recognize and enforce foreign arbitral awards.

There is no formalized mediation system, but private parties in Timor-Leste frequently resolve disputes using attorneys acting as mediators.

Many legal reforms are hindered by limited financial resources and human capacity. For instance, the Dean of the University of Timor-Leste (UNTL) Law School expressed interest in developing an arbitration training program for UNTL law students but acknowledged students’ English skills presented a significant hurdle to participation in international arbitration training and competitions.

There is limited case history regarding SOEs involved in investment disputes, but courts have ruled against SOEs. There have not been complaints of court bias in favor of SOEs.

### Bankruptcy Regulations

Timor-Leste enacted an insolvency law in 2023. Law number 1/2023, Legislative Authorization on Insolvency and Business Recovery, grants authorization for the government to establish a legal regime for bankruptcy. Implementing legislation remains to be enacted. In the most recent publication (2020), the World Bank ranked the country 168 of 190 in resolving insolvency with a score of zero reflecting no history of recovery.

							4. Industrial Policies					

### Investment Incentives

The Government of Timor-Leste offers investment incentives, including tax credits and import duty exemptions, to both domestic and international investors. There are no investment incentive programs specifically targeting underrepresented investors. An investment might be exempt from income tax, sales tax, and/or service taxes. For most industries, the corporate tax rate is 10%. Domestic investments worth over $50,000, foreign investments of over $1.5 million, and joint foreign and national resident investments where the national resident controls at least 75 percent of shares totaling $750,000 benefit from a five-year exemption from income, sales, and service taxes, and customs duties for goods and equipment used in the construction or management of the investment. The period of exemption is extended to eight years for investments in Rural Zones (outside of the cities of Dili and Baucau) and to ten years for investments in Peripheral Zones (the exclave of Oecusse and the island of Atauro). Even after these periods have expired, investors may deduct from their tax obligations up to 100 percent of the costs of constructing or repairing transportation infrastructure. Government guarantees or joint financing of foreign direct investment is not common practice; however, the government has engaged in a limited number of public-private partnerships, including development of the Timor Port. The government does not currently offer incentives to promote clean energy investments.

### Foreign Trade Zones/Free Ports/Trade Facilitation

There are no foreign trade zones in Timor-Leste. Law No.3/2014 of 2014 defines and regulates a free trade zone in the Oecusse exclave called the Special Zone for Social Market Economy (ZEESM). The ZEESM prioritized socioeconomic activities to promote the quality of life and well-being of the community, namely:

- Development of commercial agriculture
- Creation of an ethical financial center
- Creation of a free trade zone (Note: the FTZ has not been established to date.)
- Increased tourism
- Creation of a center for international studies and research on climate change
- Creation of a center of green research
- Implementation and development of industrial activities for export and import
- Other economic activities that add value to the region, as well as strengthen its international competitiveness.

The government approved a decree law in 2016 on the development of Atauro (an island offshore from Dili) as part of ZEEMS. As of April 2023, most of these objectives have yet to be realized.

### Performance and Data Localization Requirements

Individual investment agreements and government contracts may specify local content requirements. Local content requirements in the oil and gas sector are particularly strict; requirements in other sectors are often not enforced. In the oil and gas sector, to be considered for production sharing contracts, potential partners are required to include provisions for training and preferential employment for Timor-Leste nationals and for acquisition of goods and services from Timor-Leste. Requirements are applied uniformly to domestic and international investors.

There are no requirements for foreign IT providers to turn over source code or provide access to encryption.

Performance requirements are often established contractually but are not an element of government policy or regulation.

							5. Protection of Property Rights					

### Real Property

Property rights and interests are protected; however, determination of ownership can be difficult and property rights remain an issue of concern for foreign investors and businesses. The legal regime governing land and property ownership in Timor-Leste remains incomplete. A history of displacement, overlapping titles, and lack of legal clarity regarding competing claims on land and properties arising from various occupancies during Portuguese, Indonesian, and post-independence eras make protecting land titles and property rights difficult. While substantial amounts of land are subject to ownership dispute there is no consolidated accounting of the overall share. A comprehensive land law was promulgated in 2017 and national land surveys and registrations have been done. Under the law, claimants must register claims, which will be decided in arbitration. However, issuance of land titles and resolution of disputed title is pending additional government action on additional complementary legislation. Additionally, there are no administrative systems in place to track land transactions following initial titling.

Foreign persons may lease but not acquire land in Timor-Leste. Mortgages exist, however there is no legal mechanism for foreign banks to repossess property in cases of default. There are no requirements to occupy or develop property to retain legal ownership.

### Intellectual Property Rights

Timor-Leste is not listed on USTR’s Special 301 Report or the Notorious Markets List.

Section 60 of Timor-Leste’s constitution provides for the protection of literary, scientific, and artistic work. In addition, Article 1223 of the country’s Civil Code stipulates the necessity of specific regulations to protect authors of the property. Also, Article 19 of the Private Investment Law states all investors are entitled to the protection of industrial secrets, copyrights, industrial property rights, distinctive trademark signs, or any other intellectual property rights recognized by law. In December 2022 the government adopted the Copyrights Law No. 14/2022, which is scheduled to take effect in June 2023 after a 120-day period for public dissemination. Enforcement systems are untested. The law guarantees protection for the creation, production, and marketing of literary, scientific, and artistic works, including protection for the rights of the author. The government is finalizing a draft Industrial Property Code, which will contain provisions on trademarks, geographical indications, industrial designs, and patents. The code is expected to be promulgated in 2023.

International companies have printed notices in local newspapers to demonstrate claims to their trademarks and patents. However, the dearth of domestic legislation in this area means that it is unclear the extent to which these practices afford any legal protection.

The government does not track or report on seizures of counterfeit goods. No official or unofficial data is available regarding the prevalence of counterfeit goods in the economy. Timor-Leste is a member of the World Intellectual Property Organization (WIPO). For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

Timor-Leste makes limited efforts to control the sale of counterfeit goods, and does make seizures, but does not track volumes or make statistics available.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

							6. Financial Sector					

### Capital Markets and Portfolio Investment

Timor-Leste does not have a stock market. There is limited access to credit and liquidity to facilitate investment. There are no known restrictions on portfolio investment.

### Money and Banking System

As of 2019 only 54% of Timorese adults were depositors with commercial banks, and only 4% held bank loans. There are five commercial banks operating in Timor-Leste: ANZ of Australia, Mandiri of Indonesia, BRI of Indonesia, BNU of Portugal, and a subsidized National Commercial Bank of Timor-Leste. The banking system was estimated to hold $734 million in net assets in 2021. All banks in Timor-Leste are subject to prudential measures and regulation by the Central Bank. Since most of the country’s operating banks are branches of foreign banks, the system is relatively resistant to domestic economic shocks. Foreign citizens must have a tax identification number demonstrating residency in Timor-Leste to maintain an individual bank account. According to World Bank data, lending to the private sector totaled approximately $290 million in 2020. According to the Central Bank, the overall non-performing loan rate was 2.4% in 2021.

The Central Bank of Timor-Leste is the country’s monetary authority. It supervises the activities of commercial banks, money transfer operators, currency exchange offices, insurance companies, and other deposit-taking corporations, as well as serving as the operational manager of the country’s sovereign wealth Petroleum Fund. The bank also operates as the clearing house for interbank payments and undertakes bank operations for the government and Timor-Leste’s public administration.

### Foreign Exchange and Remittances

#### Foreign Exchange

The U.S. dollar is the official currency of Timor-Leste. There are no official currency controls, although the Central Bank of Timor-Leste imposes reporting requirements for the importation or exportation of cash above $5,000 and requires explicit authorization for sums in excess of $10,000. Investors may request conversion of funds into foreign currency through the banking system to transfer funds abroad to meet financial obligations incurred by the investment such as payment of imports, payment of capital or interest on loans taken abroad, or payment of rights and management services. The foreign banks operating in Timor-Leste may impose reporting requirements for transactions above a certain amount to comply with home-country anti-money laundering regulations, in addition to the requirements stipulated by the Central Bank. American citizens must have a tax identification number that demonstrates residency in Timor-Leste to maintain an individual bank account.

#### Remittance Policies

The Private Investment Law (No. 15/2017) guarantees the right to freely transfer funds abroad from any investment or reinvestment in Timor-Leste. This applies to:

- Profit and dividends paid as a result of an investment made;
- Capital resulting from the sale, liquidation, and extinction of shares in commercial companies which constitute investment, as well as the sale of business assets, which are the property of the investor;
- Capital resulting from the reduction of the capital stock of a commercial company constituting an investment;
- Amounts due on the basis of contracts which constitute investment;
- Benefits payable to amortization or payment of financial interest constituting an investment;
- Personal income obtained in the discharge of management and administration functions relating to investment participation in economic activities;
- Income from the transfer of intellectual property rights which constitute investment.
- Compensation payable as a consequence of government requisition or expropriation of the property of an investor;
- Payments arising from settlement of investment disputes.

The right to freely transfer funds abroad must be exercised in accordance with the applicable Central Bank regulations and is limited only by the application of a general legislation, such as tax legislation.

### Sovereign Wealth Funds

Established in 2005, the Petroleum Fund is Timor-Leste’s sovereign wealth fund. As of April 2023, the value of the fund stood at $16.9 billion. The Minister of Finance is responsible for its overall management and investment strategy. The Central Bank of Timor-Leste is responsible for its operational management, although the Minister of Finance has the authority to select a different operational manager. By law, all petroleum and related revenues must be paid into the Fund, with the balance of the Fund invested in international financial markets for the benefit of present and future generations of Timor-Leste’s citizens. The Fund’s receipts are invested in approximately 40 percent equities and 60 percent bonds, but 2021 changes to the Petroleum Fund Law permit the Fund to invest up to 50 percent in equities. The Petroleum Fund publishes monthly, quarterly, and annual reports online. Laws governing the Fund provide that it must maintain an independent auditor, which shall be an internationally recognized accounting firm. The Petroleum Fund meets the 24 generally accepted principles and practices for sovereign wealth funds, commonly referred to as the “Santiago Principles.” Timor-Leste is a full member of the International Forum of Sovereign Wealth Funds.

The Petroleum Fund is the primary source of funding for the government budget, with a ceiling on annual withdrawals set by law at 3 percent of Timor-Leste’s total petroleum wealth (defined as the current Petroleum Fund balance plus the net present value of future petroleum receipts). Recent budgets and supplementals have exceeded the annual ceiling with parliamentary approval. However, budgets are rarely fully executed, regularly returning up to one-third of their value to government coffers.

The Petroleum Activities Law no 13/2005, article 22, limits the government to investing 20 percent of the fund in petroleum activities. The government amended the law in 2019 to allow 5% of the Petroleum Fund to be invested in Timor Gas and Petroleum (Timor GAP), the national oil company, while reducing the percentage of the Fund held in stocks from 40% to 35%. Timor GAP must use the investment to exploit known oil and gas fields, which are commercially competitive and will contribute to development and diversification of the national economy. Timor GAP shall pay 4.5% interest on the investment and comply with reporting requirements.

							7. State-Owned Enterprises					

The Timorese government operates a small number of state-owned enterprises (SOEs) across various sectors, including broadcasting, aviation, oil and gas, pharmaceuticals, and telecommunications. Timor-Leste’s SOEs are focused on domestic operations and do not compete internationally. There is no published list of SOEs. Most SOEs operate as monopolies in their respective sectors; those that do not (Timor Telecom, Timor GAP, and RTTL) compete on a commercial basis. SOEs, however, benefit from receiving substantial financial support through subsidies from the government.
                    - The Government of Timor-Leste owns 20.6 percent of Timor Telecom -a telecommunications provider- while privately-owned Telecommunicators Públicas de Timor (TPT) owns 54 percent. As of April 2023, the government was in negotiations to buy the TPT shares held by Brazilian telecoms company Oi; the purchase would give the government a 61.7 percent majority share. In 2013, two private foreign companies began telecommunications operations, ending Timor Telecom’s monopoly of the fixed and mobile network. In exchange for the end of the monopoly, Timor Telecom acquired certain equipment procured by the government and will retain no-cost usage rights of some government-owned infrastructure and equipment until 2062.
                    - In mid-2011, the government established Timor GAP, E.P., a 100-percent state-owned petroleum company intended to partner with international firms in exploration and development of Timor-Leste’s petroleum resources and to provide downstream petroleum services. Timor GAP is supervised by the Minister of Petroleum but is governed by an independent Board of Directors. Firms that partner with Timor GAP will receive preferential treatment in tenders for petroleum projects.
                    - In November 2008, the Timorese government transformed Timor-Leste’s Public Broadcasting Service, Radio Televisão de Timor-Leste (RTTL), into a state-owned enterprise known as RTTL. The government owns RTTL under the supervision of the State Secretary of Social Communication and governed by an independent Board of Directors. In 2016, the government established an official news agency, TATOLI.
                    - In November 2005 (Government Decree No.8/2005), the government established ANATL, E.P., a state-owned company to administer the domestic airports in all aspects, including air navigation.
                    - The government created SAMES, E.P. in April 2004 (Government Decree No. 2/2004) – a public enterprise that imports, stores, and distributes medicines and medical products and equipment. In April 2015, the government converted SAMES, E.P. into SAMES, I.P., an autonomous institution, which operates under the tutelage and supervision of the Ministry of Health.
                    - In 2020, the government approved two decree laws to convert the public electricity utility known as the Department of National Electricity to Public Enterprise (EDTL, E.P) into a state-owned enterprise in the hope it will deliver better services to the customer and improve its cost recovery. Timor-Leste loses nearly half of its generated power by inefficient distribution infrastructure and consumer theft, costing the government millions annually.
                    - In 2020, the government through Decree Law no. 41/2020 established Bee Timor-Leste Empressa Publica (BTL, E.P.) as a state-owned public water utility company.
                    - In June 2022, the government through Decree Law no. 43/2022 established the National Mining Company of Timor-Leste (CMTL), S.A., mandated to undertake mining activities for business and revenue generation purposes.

Several autonomous government agencies are active in the economy: The Dili Port Authority (APORTIL), Timor-Leste’s Agency for Information and Communication Technology (TIC Timor), the National Electrical Authority (ANE), and the National Aviation Authority (AACTL) are four such agencies. Other autonomous and self-funded institution includes the National Petroleum and Mineral Authority (ANPM), which regulates the oil and gas sector.

Line ministers or the prime minister’s office supervise SOEs, but independent boards of directors administer them. Senior management reports directly to government-appointed boards of directors. Line ministers are responsible for nominating or dismissing the president of the board of directors with approval from the Council of Ministers

### Privatization Program

Timor-Leste does not have a privatization program.

							8. Responsible Business Conduct					

Businesses are generally aware of expectations and standards for responsible business conduct, although regulation of those standards is inconsistent. The government monitors business compliance with labor and environmental regulations, although the capacity to do so is insufficient. Executive compensation is captured through tax reporting, but there are no standards for corporate governance or accounting in place. Timor-Leste is a member of the Extractive Industries Transparency Initiative (EITI) and is rated as making Satisfactory progress across all assessed requirements. Labor violations are infrequently cited or prosecuted.

There have been no high-profile business-related instances of corporate impact on human rights. Child labor exists; it mostly occurs in agriculture and the informal economy but could be a concern for certain supply chains. Timor-Leste has laws concerning labor, the environment, and mineral and petroleum exploitation and worked to enforce them, although inspection and judicial capacity limits constrained enforcement effectiveness.

Land tenure is often unclear, and disputes are common. Communities have protested or rejected instances of government allocation of land for infrastructure or public use. Groups have complained that expropriated property was not valued properly by the government when paying compensation.

Civil society and other organizations generally monitor and promote human rights, both related to corporate actions and otherwise, without undue interference from the government.

Timor-Leste is not an adherent to the OECD Guidelines for Multinational Enterprises. The government does not participate in the Voluntary Principles on Security and Human Rights. Private security companies exist and are commonly used, but Timor-Leste is not a signatory of The Montreux Document on Private Military and Security Companies and is not a participant in the International Code of Conduct for Private Security Service Providers’ Association (ICoCA).

### Additional Resources

Department of State

- Country Reports on Human Rights Practices ( https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/ )
- Trafficking in Persons Report ( https://www.state.gov/trafficking-in-persons-report/ )
- Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities ( https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/ )
- U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises ( https://www.state.gov/u-s-national-contact-point-for-the-oecd-guidelines-for-multinational-enterprises/ )
- Xinjiang Supply Chain Business Advisory ( https://www.state.gov/xinjiang-supply-chain-business-advisory/ )

Department of the Treasury

- OFAC Recent Actions ( https://ofac.treasury.gov/recent-actions )

Department of Labor

- Findings on the Worst Forms of Child Labor Report ( https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings )
- List of Goods Produced by Child Labor or Forced Labor ( https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods )
- Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World ( https://www.dol.gov/general/apps/ilab )
- Comply Chain ( https://www.dol.gov/ilab/complychain/ )

### Climate Issues

Timor-Leste released a National Climate Change Policy in 2020 but has not established any policies to reach net-zero carbon emissions by 2050. The country submitted a National Adaptation Plan (NAP) in 2020 as part of its commitment to the UNFCCC and the Paris Agreement. Timor-Leste submitted its first Intended Nationally Determined Contributions in 2017, and updated NDCs in August 2022. The government does not have policies or regulatory incentives to promote renewable energy. Timor-Leste has enacted several laws addressing environmental policies, including the Environmental Basic Law (which includes climate change adaptation and mitigation issues), the Environmental License Decree Law, the Operational Law of Clean Development Mechanism, The Decree Law on Export, Import, and Use of Ozone Depleting Substances in Timor-Leste, and the Decree Law on Protected Areas. There are no policies that target commodity or supply chain drivers of deforestation. Public procurement policies do not include environmental or green growth considerations for resource efficiency, pollution abatement, or climate resilience. Data for greenhouse gas emissions do not exist beyond 2015.

							9. Corruption					

Transparency International ranked Timor-Leste 82 out of 180 countries in its 2022 Corruption Perceptions Index. In 2010, the Anti-Corruption Commission (CAC), an independent agency, opened its doors, with support from USAID and the U.S. Millennium Challenge Corporation. That same year, the Office of the Prosecutor General forwarded its first high-profile corruption case to the courts. Since then, the CAC has referred several cases to the Office of the Prosecutor General, which have resulted in several ongoing investigations. In 2016, former Minister of Finance Emilia Pires and former Vice-Minister of Health Madalena Hanjam, were convicted of participating in improper procurement of hospital beds. Both received prison sentences. In 2020 and 2021, the government waived immunity for multiple former and current parliamentarians to criminal prosecution for fraud. In January 2022, the Minister of Parliamentary Affairs and Social Justice was accused of corruption involving a contract to supply set-top cable boxes. The Prime Minister waived any immunities, and the CAC conducted an investigation. The Dili Prosecutor’s office will determine if there is sufficient evidence to submit the case to the court. As of April 2023, the investigation process was continuing. Under Timorese law, bribery is a crime punishable with up to four years of imprisonment. Timor-Leste has also signed and ratified the UN Anticorruption Convention; however, it is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

The Law on Measures to Prevent and Fight Corruption (No. 7/2020) went into effect in late 2020. The law identifies offenses, including in the private sector, which include penalties for construction fraud and a failure to declare assets or unjustified wealth. The law extends to family members of officials. Conflict-of-interest in contract awards and procurements are regulated. The law is applied in a non-discriminatory manner. Government encourages internal codes of conduct for the private sector and private companies generally implement ethics controls. Timor-Leste has ratified the UN Anti-Corruption Convention. NGOs reporting on corruption enjoy protection.

### Resources to Report Corruption

Contact at the government agency or agencies that are responsible for combating corruption:

****Anti-Corruption Commission of Timor-Leste****Rua Sergio Vieira de MelloFarolDili, Timor-LestePhone: +670 77305564; +670 77326597; or +670 77326599

Contact at a “watchdog” organization:******La’o********Hamutuk****– Walk Together****PO Box 340, Bebora, Dili Timor-LestePhone: +670 3321040Mobile: +670 77234330Email: info@laohamutuk.org

**Lalenok********ba********Ema********Hotu****(LABEH) – The Mirror for the People** Avenida Presidente Nicolao Lobato-Comoro-(in front of SDN.07-Malinamuc)ComoroDili, Timor-LestePhone: +670 3331068Email: info@labeh.org

							10. Political and Security Environment					

Timor-Leste emerged from a history of colonialism, occupation, and civil strife to the period of relative domestic calm that it has enjoyed for more than a decade. After twenty-four years of occupation by Indonesia, under an agreement between the United Nations, former colonial power Portugal, and Indonesia, a popular consultation was held on August 30, 1999, to allow the Timorese to vote on whether to remain part of Indonesia or to become independent. Seventy-nine percent of Timor-Leste voters rejected Indonesia’s governance proposal, effectively putting Timor-Leste on a path to independence. Timorese militias opposed to the decision organized and, supported by the Indonesian military, commenced a campaign of retribution. Approximately 1,300 Timorese were killed and as many as 300,000 people were forcibly relocated into West Timor as refugees. The majority of the country’s infrastructure, including homes, irrigation systems, water supply systems, and schools, and nearly 100 percent of the country’s electrical grid were destroyed. On September 20, 1999, at the request of the Timorese government, Australia led a deployment of peacekeeping troops (the International Force for East Timor, INTERFET), which ended the violence.

After almost three years of UN administration, Timor-Leste became a fully independent republic with a parliamentary form of government on May 20, 2002. UN peacekeepers departed in 2005 leaving a special political mission in its stead. In 2006, however, civil order collapsed due to domestic political struggles, which led to armed conflict between the police and military. The government of Timor-Leste urgently requested police and military assistance from Australia, New Zealand, Malaysia, and Portugal. In August 2006, the UN Security Council passed Resolution 1704, creating the United Nations Integrated Mission in Timor-Leste (UNMIT) to assist in restoring stability, rebuilding the security sector institutions, supporting the Government of Timor-Leste to conduct the 2007 presidential and parliamentary elections, and achieving accountability for crimes against humanity and atrocities committed in 1999. An Australian-led International Stabilization Force (ISF) supported UNMIT’s mission. Timor-Leste held free, fair, and largely peaceful presidential and parliamentary elections in 2007. Nobel Peace Prize Laureate José Ramos-Horta assumed the presidency, and former guerilla leader and outgoing president Xanana Gusmão became prime minister.

National elections for president and parliament in 2012 were peaceful, free, and fair. UNMIT and the ISF departed from Timor-Leste at the end of 2012. Following free, fair, and peaceful parliamentary elections in July 2017, Mari bin Amude Alkatiri became prime minister of a two-party coalition government. In a March 2017 presidential election, also judged as free and fair, voters elected Francisco Lu Olo Guterres. In contrast with previous years, elections proceeded without extensive support from the international community. Security forces maintained public order with no reported incidents of excessive use of force. Alkatiri’s government was not able to pass its program or budget. Early parliamentary elections in May 2018 were considered fair and transparent, with 81% voter turnout.

In January 2020, the coalition government rejected its own budget in protest of ongoing ministerial vacancies, and the prime minister submitted his resignation to the president. The prime minister subsequently withdrew the request to resign and assumed leadership of the country’s COVID-19 response. The president maintains the authority to determine whether the country will hold early elections to resolve a political impasse or whether the political parties in parliament should form a new government. Following changes in the ruling coalition membership, the Eighth Constitutional Government continues. After political instability in the governing coalition delayed passage of the 2020 budget by ten months, the 2021, 2022, and 2023 budgets were successfully passed on time. In April 2021, the government passed a budget amendment responding to the continuing COVID-19 pandemic and natural disasters, including severe flooding in Dili.

Two rounds of presidential elections in March and April 2022 were peaceful, free, and fair, with over 75% voter turnout. Parliamentary elections are scheduled for May 2023.

Occasional factional political violence can temporarily impact local retail businesses. There have been no instances in the past ten years of damage to projects or installations.

							11. Labor Policies and Practices					

The Private Investment Law stipulates that all investors are required to employ Timorese workers and promote their professional training for the performance of qualified functions, including the improvement of technical or managerial knowledge. Domestic labor laws are not waived to attract investment. The law does grant qualified investors the right to a minimum of five work visas for workers or collaborators qualified for supervisory, directing, or technical functions necessary for the investment project, and the ability to request work visas for foreign workers required to install or operate the venture. Timor-Leste’s immigration laws permit workers to apply for work permits in-country after entry on a 30-day visa acquired at arrival; however, U.S. citizens consistently report difficulties getting work permits approved in time. Delays in work permits can subsequently lead to penalties for overstaying visas, which can amount to hundreds of dollars.

Shortages of skilled labor remain a significant constraint on private sector growth in Timor-Leste. Shortages of skilled workers are particularly notable in the construction and fishing sectors. Public and private sector employers also consistently encounter problems locating managerial, clerical, and other office staff. There is a surplus of young, inexperienced, unskilled labor, with roughly 15,000 new entrants into the labor market each year in an economy with an estimated total of 70,000 formal sector jobs for a total country population of approximately 1.36 million. Youth unemployment is estimated at 13.4%. Agriculture, the largest sector, employs 59% of the population, the majority of which is subsistence agriculture. Data shows that the unemployment rate increases at higher levels of education, indicating a mismatch between training and skills sought by employers, and in particular a lack of vocational training. The government, donors, and employers place considerable emphasis on education and training to build local capacity. This policy aims not only to fill the skill gaps but also to meet local hiring requirements for foreign investors. There is a significant gender imbalance in employment, with the percentage of working age women having substantially lower participation rates, and higher unemployment rates than men.

Only about a quarter of the working age population works in the formal economy. About 28% are unemployed, unpaid household workers, informal workers, retired, or not seeking work. Another 27% are subsistence farmers or fisher people, and 21% are students. Apart from agriculture and fisheries, informal employment largely involves small-scale commerce, including informal vending and handicrafts. Of those formally employed, 82% work in the capital municipality of Dili. The oil and gas sector employs only 0.1% of the working age population, although it contributes 12% of the national GDP.

Foreign migrant workers constitute a small portion of the workforce, with unemployment rates equal to or higher than domestic workers. Substantial numbers of Timorese go overseas to work, with the United Kingdom, Australia, and South Korea being popular destinations. Government programs support training for out-going migrant workers. Worker remittances represent a significant source of national income, totaling $397 million in 2020.

The 2012 Labor Law put in place regulations for labor conditions, including a 44-hour work week, standard benefits such as leave and premium pay for overtime, and minimum standards of worker health and safety. The minimum wage for full-time employment remains set at $115 per month, where it was established by the government in 2012. Enforcement of labor laws declined in recent years due to budget shortfalls, and enforcement in 2020 and 2021 was constrained by COVID-19.

The government’s labor inspectorate identifies and remediates labor violations and holds violators accountable, investigates and prosecutes unfair labor practices, such as harassment and/or dismissal of union members, and investigates and prosecutes instances of forced and/or child labor. Most cases come from temporary labor agreements in the construction and service sectors. Labor inspection numbers rose in 2021 after having been limited in 2020 due to the COVID-19 pandemic and related government measures. The labor inspectorate does not have the authority to inspect informal workplaces.

As stipulated in labor code, workers have the right to strike; however, they must notify companies in advance of the planned strike, and most labor disputes are settled through mediation and arbitration. Workers must present claims in writing to their employer and give the employer five days to respond prior to declaring a strike. If the employers do not respond within that timeframe or respond but the parties do not reach agreement within 20 days, the organization representing the workers must provide five days’ advance notice of a strike. Strikes can be stopped by the government if they disturb public order.

Labor unions exist and engage in collective bargaining and exercise rights to strike. Timor-Leste’s formal economy is small, and no data is available on percentages of employees covered by unions or participating in collective bargaining.

Various businesses protested state-of-emergency provisions imposed to control the COVID-19 pandemic that severely limited economic activity. Government responses and outcomes have been peaceful. A successful vaccination campaign and falling case counts led to the relaxation of most restrictive measures. Before the COVID-19 pandemic, strikes against international companies occurred primarily over employment contracts and salary entitlements but yielded limited disruption.

The Government of Timor-Leste is member of the following major international labor and human rights conventions:
                    - International Labor Organization (ILO) Convention No. 29 on Forced Labor
                    - ILO Convention No. 87 on Freedom of Association and Protection of the Right to Organize
                    - ILO Convention No. 98 on the Right to Organize and Collective Bargaining
                    - ILO Convention No. 182 on the Worst Forms of Child Labor
                    - International Covenant on Civil and Political Rights
                    - International Covenant on Economic, Social, and Cultural Rights

The ILO has raised concerns about Timor-Leste’s compliance with reporting requirements, and the completeness of the country’s legal regime relating to labor. Observers have not raised serious questions regarding compliance with international labor standards in practice.

The Maritime Boundary Treaty with Australia, which entered into force in 2019, delineates special labor and migration regulations for Timorese and foreign workers on the Bayu Undan project and other offshore projects in the EEZ.

							12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs					

The Overseas Private Investment Corporation (OPIC) and the Government of Timor-Leste signed an Investment Incentive Agreement in 2002. OPIC became the U.S. International Development Finance Corporation (DFC). U.S. government investment support does not require prior approval by the government of Timor-Leste. To date the DFC has not negotiated an amendment of or replacement to the 2002 agreement. There are no current active or planned DFC projects in Timor-Leste. Potential U.S. investors and exporters are encouraged to contact the U.S. Export Import bank (www.exim.gov), the U.S. International Development Finance Corporation (www.dfc.gov), and the United States Trade and Development Agency (www.ustda.gov). Timor-Leste has been a member of the Multilateral Investment Guarantee Agency (MIGA) since 2002, and the International Finance Corporation (IFC) has operated in Timor-Leste since 2006.

							13. Foreign Direct Investment Statistics