Economic Stagnation: By fiscal year 2004-5 economic growth had turned positive and macroeconomic stability had been achieved through sound fiscal management. Twelve months later, in mid-2006, with violence breaking out in Dili, economic activity came to a virtual standstill.

Almost all Timorese earn their incomes in the non-oil sector, where per capita incomes have been stagnant in real terms since 2002. Consumer prices have increased by around 13 percent since March 2006. Private investment is minimal. Job creation has stalled – it is estimated that some 15,000 young people enter the labor market each year, while only 400 formal jobs are being created.

According to the 2004 census, unemployment in Dili was estimated at 23 percent and youth unemployment at 40 percent, rising to 58 percent for the 15-19 age group. With half the population under 18, urban youth unemployment and its associated problems will increase unless vigorous growth in the non-oil sectors can be created. Poverty in Timor-Leste affected about 39.7 percent of the population in 2001 and it is on the increase.

Education:  There has been some progress in education since independence. The increase in the total number of children enrolled in school is offset by the need to accommodate a rapidly rising school age population, poorly prepared teachers, insufficient or poor physical infrastructure, weak budget execution and lack of access to textbooks and other teaching and learning materials. Drop out and repetition rates are high – only 46 percent of children starting primary school reach Grade 6, while 80 percent of students starting lower secondary school reach grade 9.

Health: Child and maternal mortality, child malnutrition and fertility indicators for Timor-Leste remain among the highest in the region. In 2003, the child mortality rate was 83 per 1,000 children and nearly two-thirds of children under five were underweight.

Fertility rates are among the highest in the world with women having an average 7.7 children. High fertility and the low rate of attendance by skilled health personnel during childbirth contribute to high maternal mortality rates, estimated at 660 per 100,000 births. Communicable diseases such as diarrhea, TB and malaria are prevalent. Vaccination rates have improved but only 18 percent of children were fully immunized in 2003.

Planning and Financial Management (PFM): The PFM system in Timor-Leste faces serious challenges being the most important the extremely low budget execution on a cash payments term caused by thin capacities, no complete chains of phases and actions in particular in capital/development expenditure and the security situation causing instability and uncertainties in the staff and institutions. The surge in oil revenues has yet to be translated into economic growth because of the inability to effectively spend the sustainable income from the Petroleum Fund through the budget. Weak budget execution as evidenced by very low execution on a cash-basis during the first three quarters of the FY2006-07 has resulted in inefficiencies including (i) a rush for contracting expenses made in the last quarter, (ii) significant carry-overs of unspent budget, and (iii) as a result, an accumulation of excessive cash, liquidity in the Treasury. 

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Health: Twenty-eight community health centers have been built and others refurbished since the program to help the Ministry of Health to create a sustainable healthcare system started in 2000. H undreds of health staff have been trained and an autonomous medical supply system (SAMES) established. This has contributed to increased outpatient visits, midwife assisted births and increased child immunization rates. In addition, with co-financing from the European Commission, three new regional hospitals have been constructed and the Guido Valadares National Hospital is being rehabilitated.

Education:  The World Bank is assisting the Ministry of Education in the development and implementation of policies in the primary, secondary and tertiary education sectors. It is assisting in the construction and rehabilitation of over 2,000 new classrooms. By 2012 there will be around 65,000 new school places for students attending both primary and secondary schools. Over 55,000 textbooks, and during the school year 2006-07, alone, 135,000 Lafaek magazines were distributed.

Agriculture: The World Bank works with the Ministry of Agriculture, Forests and Fisheries in extending improved upland farming and conservation techniques to farmers, rehabilitating small and large irrigation schemes, improving access to agribusiness and market information and delivering livestock health services. Over 3,800 hectares of irrigation land has been rehabilitated (about 1,000 hectares), more than 380 village livestock workers have been trained and about 80 percent of livestock vaccinated against disease. In addition, substantive support to strengthening the institutional capacity of the ministry has been provided.

Budget Execution and Resources Management: Jointly with a AusAID-supported project, the World Bank is assisting the Ministry of Finance and main line-ministries to pursue a combination of reforms aimed at (i) strengthening links between planning, budgeting and implementation, (ii) improving PFM systems and processes, (iii) strengthening line ministry planning, and (iv) preparing a project pipeline, (v) addressing PFM developments that are justified on sound principles; and (vi) building capacities on PFM across the main institutions and agencies. The Bank is also assisting the reform of the PFM systems to enhance its impact on improved organizational culture and staff performance.

Management of Petroleum Resources: The World Bank has assisted in developing the capacity  of the Timor Sea Office, with specialty staff now working in the Secretary of State and Natural Resources, supported capacity building workshops on the petroleum sector and advised on legislation. The World Bank currently supports the country’s efforts to implement the Extractive Industries Transparency Initiative (EITI), launched in 2002, which aims to increase the accountability of governments and companies in resource management throughout the world.

For more information about World Bank studies and reports on Timor-Leste, click here.

For more information on the World Bank’s work in Timor-Leste, visit: www.worldbank.org/tl

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World Bank Office in Dili

Avenida dos Direitos Humanos
Dili, Timor-Leste

Dili

For media enquiries:
Gabriela Leite Soares
Communications Assistant
Tel: (670) 332 4649
E-mail: gleitesoares@worldbank.org

For public enquiries:
VACANT

Public Information Assistant
Tel: (670) 332 4649
Fax: (670) 3321 178



Washington, D.C.
Mohamad Al-Arief
Phone: (202) 458-5964
Email: malarief@worldbank.org

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October 2007