No small beer for East Timor – The Edge Review

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A father and son look for seashells along Dili Harbor. (Simon Roughneen)

A father and son look for seashells along Dili Harbor. (Simon Roughneen)

Foreign brewers show interest, but investment concerns remain

JAKARTA – East Timor’s official investment agency says that Heineken aims to invst up to US$40million in a new brewery, generating 1000 jobs. Danish brewer Carlsberg also sent a delegation to examine opportunities in the the oil-rich but otherwise poor southeast Asian country

Such deals are rare for East Timor, also known as Timor-Leste, which this year marked 15 years since voting to secede from Indonesia and which remains dependent on oil and gas for 95 percent of government revenues.

Of the two beermakers, Heineken’s plans are more advanced, with the company already registering a local office. Heineken has long had a strong presence in Asia, making Indonesia’s Bintang and Singapore’s Tiger Beer, and is expected to come up with a Timorese branded brew.

Tony Duarte, Chief of Staff for The State Secretary for the Support and Promotion of the Private Sector of Timor-Leste (SEAPRI), told The Edge Review that the Heineken deal will raise the country’s profile as an investment destination. “Timor-Leste will be placed in a spotlight of countries in which world renown[ed] companies will be able to consider and may eventually attract them to look for other business opportunities for investment in the country,”  Duarte said.

The mooted investments come as the World Bank’s annual Doing Business survey reported that East Timor was the most improved country for setting up a new enterprise.

The survey said that “Timor-Leste, the economy that improved the ease of starting a business the most, did so by creating a one-stop shop. Now entrepreneurs can complete several formalities in one place—reserving a company name, submitting company documents, applying for registration and publishing company statutes. By streamlining start-up formalities and centralizing services, the new one-stop shop reduced the time required to start a business from 94 days to just 10.”

However overall East Timor is a lowly 172 out of the 189 countries assessed, due to failures to improve areas such as property registration and contact enforcement

Government spokesman Agio Pereira acknowledged that his country need to make improvements if it is to become a congenial place to do business. “In a young nation we know we cannot do everything at once, and as we move to address other areas we are confident of further improvements to create an excellent environment in Timor-Leste for business enterprise,” Pereira said.

Conoco-Phillips is East Timor’s biggest investor, with a 57.2 percent stake in the country’s main source of income – the Bayu Undan gas field in the Timor Sea. Other investors of note include Portugal Telecom, which has a 76 percent share of Telecomunicações Públicas de Timor (TPT), which in turn owns 54 percent of Timor Telecom (TT).

TT is one of 3 mobile network providers now operating in East Timor’s tiny telecommunications market, since Vietnam’s Viettel and Indonesia’s Telin acquired operating licences in 2011. The country’s population is 1.2 million, and while oil and gas inflated GDP per head is $4,835, real incomes among the 70 percent rural population are much lower.

Around half the population thought to be living under the the $0.88 a day poverty line and subsists on small, sometimes hilly, patches of farmland – meaning that East Timor cannot yet offer a large or wealthy consumer market to would-be investors.

The country’s reputation has been tarnished by recent and high profile corruption cases, with the former Justice Minister Lucia Lobato convicted in 2012 and current Finance Minister Emilia Pires indicted earlier this year.

Moreover, in late October the parliament voted to oust foreigners working in the justice system, a move described by The Asia Foundation as “a dramatic challenge to the principles of democracy.” Speculation is mounting that the vote was instigated by Prime Minister Xanana Gusmao after court rulings against the government in a lucrative tax dispute with Conoco-Phillips, as well as an attempt to shield the Finance Minister from prosecution.

Conoco-Phillips has criticised to the move, saying it could damage East Timor’s threadbare legal system and in turn deter investors.

“The government relies upon significant numbers of foreign experts and advisors to augment local resources,” reported the U.S. Dept. Of State’s 2014 Investment Climate Statement on East Timor.

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