Strengthening public institutions and diversifying the economy are high on the agenda in Timor-Leste, which envisions building a stronger nation and becoming one of the global champions of the 2030 Agenda. Most national investment plans are currently financed by generous state oil revenues, but without diversifying the economy and reducing high unemployment, Timor-Leste may struggle to reach its development goals. Another concern is that a move to decentralize governance structures to improve service delivery in rural areas has been hindered by weak capacities in public institutions. The Government of Timor-Leste formalized a partnership with UNDP for policy advice, technical expertise and capacity development to address these challenges.

Government partners trust UNDP’s ability to quickly systematize and contextualize global and regional knowledge, reducing learning curves and ‘time to market’. Fast delivery of pilot projects offers proof of concept and is combined with support for national capacities to expedite broader implementation. UNDP-brokered partnerships with the private sector deliver benefits to public sector entities while allowing them to remain focused on their core mandates.

UNDP programming instruments are well suited for managing funding from multiple sources while respecting aid effectiveness principles, including national ownership. This enables a multiplier effect when domestic resources are entrusted to UNDP and combined with international finance. Both international donors and the Government know that UNDP will apply high standards of transparency and cost-efficiency and ensure timely results.

Boosting Economic Development

UNDP has been a trusted partner of the Government since Timor-Leste was born out of crisis in 1999. It has supported reconstruction, peacebuilding and conflict prevention, institutional development and poverty reduction. Recent assistance has focused on further developing policies, institutions and human capacities in the transition from a post-conflict, fragile state to a fast-moving, stable, middle-income country. This longstanding relationship provides space for policy development support and innovative thinking to solve socioeconomic challenges—and to scale up the most successful solutions.

With co-financing from the Government of Timor-Leste, UNDP is helping to establish a special economic zone, foster social businesses and make local governance more effective.

The Oe-Cusse district, nestled within the western region of Timor-Leste, is characterized by high unemployment and subsistence agriculture, and some of the country’s most limited access to sanitation, electricity and drinking water. Underdeveloped financial services constrain business development and productive employment opportunities.

To boost economic activity, the Government decided to establish a special economic zone to serve as a trade and industrial center. It sought UNDP’s assistance to strengthen governance in the center and devise policy instruments to enhance socioeconomic development. A two-component programme has aimed to create a fast, responsive and tech-enabled regional governance structure, and to strengthen community-based business models, access to finance and services backing businesses catering to local needs.

Overall, UNDP’s approach has allowed authorities nationally and in the special economic zone to focus on issues of strategy and policy orientation, rather than getting bogged down in day-to-day operational challenges. UNDP is helping to institute an efficient and robust procurement system, improve capacities for planning and oversight, and devise a rural development strategy to create jobs, increase livelihoods and encourage the careful stewardship of natural resources. Technical expertise has aided the formulation of new policies related to partnership development, stakeholder engagement, skills building, the zonal management company and land governance.

New business models for social enterprise ecosystems and regeneration of the rural economy have been devised, and the Social Entrepreneurship and Economic Development (SEED) Fund for inclusive rural development launched. With the World International Property Organization, UNDP is providing guidance on using geographic information systems to help increase exports of organic agricultural products. The introduction of modern farming technologies and strengthening of supply and value chains between rural areas and the special zone have led to higher yields and incomes.

In a short period, through UNDP’s facilitation, authorities in the zone have been able to strike an agreement with the Singapore International Arbitration Centre for serving as the preferred institutional arrangement for dispute resolution, a key instrument to attract business and investment. Links to the Singapore Polytechnic Institute and the Temasek Foundation are helping to build skills in the hospitality sector. Fellowship schemes have been established with both the Lee Kuan Yew School and Harvard Business School, with the latter also serving as an adviser to the SEED Fund.

For Timor-Leste as a whole, the Ministry of Commerce Industry and Environment collaborates with UNDP to identify new ways for the private sector to create jobs and help reduce poverty. There is a particular emphasis on developing small and medium businesses, home-based producers and cooperatives that can stimulate the rural and peri-urban non‐oil economy. Also, a priority are businesses that meet critical gaps in products and services for the poor related to the SDGs.

Important policy results include a new National Industrial Policy geared towards the enhancement of livelihoods, jobs creation and poverty reduction. UNDP research has provided critical inputs for better targeting of policies and programmes to ease barriers to small and medium enterprises, including through the broader provision of financial services.

One aim is to build a strong network of public and private actors engaged with social businesses, and to establish a functional financing mechanism for these enterprises, which operate as businesses but are geared towards meeting social needs. Several social businesses have been piloted to show potential ways forward. One initiative in the capital provided additional income to nearly 1,000 people and cleaned the streets by removing 2.5 million plastic bottles. Another introduced modern salt-making methods to mostly women salt farmers. This reduced the burning of firewood and its negative health and environmental impacts, and increased domestic salt supplies, cutting dependence on imports.

Supporting decentralization towards better services

Efforts to reduce poverty and improve local development depend largely on more effective local governance, improved public participation and enhanced local capacities to deliver services, particularly to vulnerable groups. Through co-financing, UNDP is helping Timor-Leste move towards the decentralization of public administration, so that services can be delivered at the local level, close to the people they are meant to benefit. It is also supporting stronger subnational investment planning, accompanied by improved follow-up implementation and public financial management. Assistance in climate-proofing small-scale infrastructure helps in making rural communities more resilient in the face of climate shifts.

UNDP has provided a diagnostic methodology and tools on institutional strengthening as well as training to the Secretary of State for Institutional Strengthening and nine-line ministries. This helped shape the recently adopted Policy for Strengthening Institutions (2016-2030), accompanied by a mechanism to monitor implementation. In six municipalities, a foundation course on policy, strategy, leadership and management has informed civil servants about the national development vision and how they can contribute through better service delivery.

Through integrated municipal development planning, climate-resilient small-scale infrastructure projects were factored into planning and budgeting in 2015. Eleven infrastructure projects were built in three municipalities: Baucau, Ermera and Liquica. Based on geographic information system technology, UNDP produced 24 climate hazard and risk maps indicating hotspot areas in 79 villages in the three localities, helping central and local authorities to make informed decisions, and move towards longer term planning and investment. In three districts, the Integrated District Development Programme Maintenance Grant System was piloted to support infrastructure management and climate proofing, with an emphasis on community engagement to increase ownership and provide additional income.