Promoting and implementing trade facilitation in Timor-Leste during COVID-19 pandemic crisis

Decio Ribeiro Sarmento

Timor-Leste has yet to graduate from the Least Developed Country (LDC) status. As a LDC country, there are still some gaps that impede international trade transactions in Timor-Leste. Those challenges include an inefficient organization, equipment issue, inadequate infrastructure and policy and regulatory hurdles.

The world has traded across borders more now than at any time in history. Countries in Asia as well as Australia and New Zealand account for most of Timor-Leste’s trade and investment flows. Timor-Leste’s non-oil trade is heavily concentrated on a small number of goods and services, since Timor-Leste is still at early stage of economic development. Increasing foreign direct investments and greater diversification of exports are critical to stimulate productive activity within the country and reduce the reliance on oil and gas revenues.

Globally, the COVID-19 pandemic continues to disrupt trade activities and threaten public health and livelihoods. In Timor-Leste, the COVID-19 pandemic crisis has slowed down the economic activities. Estimates suggest that the economy in Timor-Leste contracted by about 7 percent in 2020, the largest decline since independence. Although the borders between Timor-Leste and neighbouring countries were closed for people movement during COVID-19 restrictions, Timor-Leste managed to facilitate the movement of goods and cargo imported, exported and in transit.

In responding to the COVID-19 pandemic, the Government of Timor-Leste has strategically developed economic recovery plans, in which the provision of support to private sector development is one of the key elements.

What is TradeInvest Timor-Leste?

Promoting and developing Timor-Leste’s investment and export potentials is imperative. Timor-Leste's major objectives on private investments are to promote and facilitate both domestic and foreign investment and to increase the role of the private sector in the country's economic development and diversification, particularly by creating employment opportunities and stimulating export growth.

TITL, the Investment and Export Promotion Agency of Timor, is apublic institute created to perform its main functions in promoting, facilitating, monitoring and advocating for private investments and exports in the country. The law governing private investments and export promotion in Timor-Leste is administered by TITL.

How didTradeInvest Timor-Leste contribute to facilitating trade during COVID-19 pandemic?

Simplifying procedures

One of the vital steps towards the objective of economic integration in Timor-Leste is to implement digital trade facilitation that involves a comprehensive upgrading of Timor’s national single window platform for trade activities. Since 2016, Timor-Leste’s Customs Authority has demonstrated a clear commitment to improve the efficiency of customs clearance processes to facilitate trade. It is evident that there is an increasing importance of digital trade facilitation accelerated by the global COVID-19 pandemic. Since the COVID-19 outbreak, TITL has become the first relevant government agency to integrate into the national single window system, in which a technical cooperation agreement between Customs Authority and TITL was signed in February 2021 for the implementation of the system.

One crucial role of TITL is to promote and facilitate private investments in Timor-Leste. Under the Timor-Leste’s Private Investment Law, the Government provides fiscal (e.g. tax and customs) and non-fiscal (e.g. land lease) incentives to both national and foreign investors wishing to obtain an investment certificate issued through TITL. In performing its facilitation role to private investors holding investment certificate, TITL has utilized digital trade facilitation and implemented the national single window system aiming at decreasing bureaucratic procedures, time savings and less paperwork for cross-border trade operations. Trading in Timor-Leste becomes cheaper, faster, simpler and greener.

During the COVID-19 crisis, the role of technology in promoting trade facilitation has become increasingly prominent in Timor-Leste. TITL facilitates investment certificate holders in getting approval of their imported materials for investment projects, with 100% import tax exemptions by utilizing the electronic single window system, which is based on UNCTAD Automated System for Customs Data (ASYCUDA). Up until now, TITL has utilized the electronic single window system and been able to handle up to 10 investment incentive beneficiaries to process declaration for import tax exemptions and clearance of imported goods as part of the government incentives provision. This has helped not only to make this kind of transactions cheaper, faster, simpler and greener but also safer, helping to avoid physical contacts as part of COVID-19 restrictions protocol in the country.

Enhancing transparency

Another crucial role of TITL is to facilitate the disclosure of online information related to export promotion in Timor-Leste, creating a more transparent trade environment. Timor-Leste ranks 181 out of 190 in the World Bank’s Ease of Doing Business Index Report 2020. Some constraints include the absence of easily accessible platform for relevant information, high reliance on personal networks and lack of clarity about business set-up processes. This is quite evident for the business community in Timor-Leste with export orientation. Therefore, TITL promotes openness and accountability of Government’s actions by disclosing online information related to trade procedures in a way that public can readily and easily access and use it, especially in difficult times of the global COVID-19 pandemic.

Currently, information on trade procedures is provided by multiple sources such as TITL, Customs Authority and its registered Customs Brokers and other relevant line ministries and agencies. This makes accessing information difficult. TITL is working on improving the situation by consolidating information related to trade processes and procedures and making this information available through a user-friendly digital format. The online trade information portal will facilitate transparency and communication of regulations and information related to export, import and transit procedures with the national and foreign trade community, in line with Article 1.2 of the WTO Trade Facilitation Agreement.

To support boosting implementation of trade facilitation in Timor-Leste during COVID-19 pandemic crisis, TITL is in the process of developing an online “Exporter Guide” aiming at facilitating and providing businesses with detailed information on all steps required for export and import. The digital platform will be expected to facilitate and assist traders in a user-friendly way by clearly describing regulatory requirements and mandatory processes as well as relevant stakeholders and their respective functions. This digital exporter guide will be made available to public via TITL official website.

In conclusion, trade facilitation and investment are a crucial part of Timor-Leste’s strategy for economic growth, job creation and poverty alleviation. This has been embedded in the Timor-Leste’s National Strategic Development Plan (SDP) 2011-2030.

Since its restoration of independence in 2002, Timor-Leste has struggled to attract foreign direct investments, develop domestic production and diversify exports beyond oil and gas sector. In order to integrate Timor-Leste’s economy into regional and global value chains, following aspects must be considered: strengthening institutional and regulatory framework, intensifying human resources development and improving overall economic competitiveness.

Despite the challenges and gaps, Timor-Leste has strengthened trade relations with the regional and international community and is currently working towards its accession into ASEAN and WTO membership as well as European Union-Economic Partnership Agreement (EU-EPA). This can provide a strong foundation to improve Timor-Leste’s economic competitiveness, facilitate international trade transaction and secure access to growing markets for Timorese goods and services.

TradeInvest Timor-Leste (TITL) has become part of the government institution in promoting and implementing trade facilitation in Timor-Leste during COVID-19 pandemic crisis. The successful implementation of the digital trade facilitation initiative was possible thanks to the private sector engagement. Hence, TITL should ensure the simplification, transparency and accountability related to trade and investment in Timor-Leste is effectively and efficiently provided to private sector players through a “public-private” dialogue platform as, for instance, in the framework of the Timor-Leste Trade Facilitation Committee.

TITL has understood its critical role in this context and is committed to accelerate implementation of simplification and transparency measures to make trade in Timor-Leste cheaper, faster, simpler, greener and, foremost, safer, as the shadow of COVID-19 keeps darkening the future of global recovery.

Decio Ribeiro Sarmento

Born and raised in Dili, Timor-Leste, Decio Ribeiro Sarmento has extensive and dynamic work experiences for over 10 years in various positions and areas. He is currently working as a Director of Export Promotion with TradeInvest Timor-Leste, the main government agency responsible for investment and export promotion. Decio also actively engages in Timor-Leste’s WTO and ASEAN accession process as economic core team. His current engagement as the government official plays a very important role for a sustainable development process in Timor-Leste by designing a path for economic diversification, which can further lead to stimulation of private investment and export growth, more job creation, and poverty alleviation. He holds some prestigious awards including the Australian Leadership Award and Fulbright Scholarship Award. Decio gained a Bachelor of Medical Science from Latrobe University, Australia; a Master of Public Health from University of Queensland, Australia; and a Master in Environmental Health and Science from Georgia State University, USA.

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