De m o c ra tic Re p ub lic o f Tim o r - Le ste
G e ne ra l Bud g e t o f the Sta te
a nd Sta te Pla n fo r 2009
1 Ja nua ry to 31 De c e m b e r 2009
Re vise d b y the Ministry o f Fina nc e
2
Table of Contents
Ta b le o f C o nte nts ...2
Pa rt 1 Prim e Ministe r’ s Sp e e c h ...6
Pa rt 2 Exe c utive Summ a ry ...19
The C o mb ine d So urc e s Bud g e t...19
The Ec o no m y ...20
Re ve nue , Susta ina b le Inc o me a nd the Pe tro le um Fund ...21
G e ne ra l Bud g e t o f the Sta te fo r Timo r-Le ste ...21
C a p ita l Exp e nd iture ...24
Pa rt 3 – De ve lo p ing the Distric ts ...27
Intro d uc tio n ...27
Typ e s o f Exp e nd iture in the Distric ts...27
Dili...29
Ba uc a u ...35
Aile u ...42
Aina ro ...48
Bo b o na ro ...54
Erme ra ...61
La ute m ...67
Liq uic a ...73
Ma na tuto ...79
Ma na tuto ...79
Ma nufa hi...84
Ma nufa hi...84
O e c usse ...90
C o va Lim a ...96
Viq ue q ue ...101
Pa rt 4 – G e nd e r a nd C ulture Sta te me nt ...106
3
C ulture ...106
Pa rt 5 – Ec o no m ic O ve rvie w ...107
Inte rna tio na l Ec o no m y...107
Re g io na l Ec o no m y ...108
Do me stic Ec o no my (No n O il G DP) ...109
Infla tio n ...109
Po ve rty...111
Pe tro le um Fund ...111
Pa rt 6 – Re ve nue ...113
To ta l Re ve nue ...113
Pe tro le um Re ve nue ...114
Pe tro le um Fund ...115
Pe tro le um Re ve nue s, We a lth a nd Susta ina b le Inc o me ...116
Re vie w o f Me tho d o lo g y ...119
Do me stic Re ve nue ...123
Pa rt 7 Exp e nd iture ...125
Intro d uc tio n ...125
Fund ing fro m De ve lo p me nt Pa rtne rs...131
Sa la rie s, Wa g e s a nd o the r Allo w a nc e s ...137
G o o d s a nd Se rvic e s ...138
Mino r C a p ita l...139
Pub lic Tra nsfe r Pa yme nts ...140
C a p ita l De ve lo p m e nt ...142
O ffic e o f the Pre sid e nt ...144
Na tio na l Pa rlia me nt...152
O ffic e o f the Prime Ministe r ...161
Se c re ta ry o f Sta te fo r the C o unc il o f Ministe rs...170
Se c re ta ry o f Sta te fo r Yo uth a nd Sp o rt...176
Se c re ta ry o f Sta te fo r Na tura l Re so urc e s...184
4
Se c re ta ry o f Sta te fo r Em p lo yme nt a nd Vo c a tio na l Tra ining ...194
Se c re ta ry o f Sta te fo r the Pro mo tio n o f Eq ua lity ...202
C ivil Se rvic e C o m m issio n...208
Ministry o f De fe nc e a nd Se c urity (C o nso lid a te d ) ...212
Ministry o f De fe nc e a nd Se c urity...213
Se c re ta ry o f Sta te fo r De fe nc e ...216
FALINTIL – FDTL...220
Se c re ta ry o f Sta te fo r Se c urity...224
PNTL...232
Ministry o f Fo re ig n Affa irs...236
Ministry o f Fina nc e ...251
Ministry o f Fina nc e -- Who le o f G o ve rnme nt ...256
Ministry o f Justic e ...258
Ministry o f He a lth ...264
Ministry o f Ed uc a tio n ...276
Ministry o f Sta te Ad ministra tio n a nd Te rrito ria l Ma na g e m e nt ...302
Ministry fo r Ec o no m y a nd De ve lo p me nt...310
Ministry fo r So c ia l So lid a rity ...331
Ministry o f Infra struc ture ...347
Ministry o f To urism , C o m me rc e a nd Ind ustry ...357
Ministry o f Ag ric ulture a nd Fishe rie s...363
Trib una ls...375
Pro se c uto r G e ne ra l ...380
Pro ve d o r o f Huma n Rig hts a nd Justic e ...387
Pub lic Bro a d c a sting Se rvic e o f Timo r-Le ste ...392
Na tio na l C o m m issio n fo r Ele c tio ns ...397
Anti –C o rrup tio n C o m m issio n ...400
Ele c tric ity o f Timo r-Le ste ...404
Po rts Autho rity o f Timo r-Le ste ...409
5
Institute o f Ma te ria l a nd Eq uip me nt (IG E) ...416
Anne x 1 To ta l Exp e nd iture Inc lud ing Auto no mo us Ag e nc ie s ...419
Anne x 2 To ta l Exp e nd iture Exc lud ing Auto no mo us Ag e nc ie s ...420
Anne x 3 Bud g e t Ap p ro p ria tio ns fo r 2009...421
Anne x 4 C a p ita l Pla n fo r 2009 to 2011 ...443
Anne x 5 Sta ffing Pro file fo r the Sta te ...464
C ivil Se rva nts...464
No n-C ivil Se rva nts ...483
Sta ff in Auto no mo us Ag e nc ie s...485
Po litic a l Ap p o intme nts ...485
Anne x 6 Ra te s o f Sa la rie s fo r the Pub lic Se c to r a nd Pe nsio ns Pa id b y the Sta te ...488
Anne x 7 Bud g e t La w ...491
Anne x 8 Sub sid ie s to Auto no mo us Ag e nc ie s...500
Anne x 9 Le tte r to the Pa rlia me nt Re g a rd ing the Exc e e d ing o f Susta ina b le Inc o me ...501
Anne x 10 De lo itte s Re p o rt o n Susta ina b le Inc o me ...504
Anne x 11 Re q uire me nt Fo r Tra nsfe rs Fro m Pe tro le um Fund ...510
Anne x 12 Aud it Re p o rt o n c a lc ula tio n o f Estim a te o f Susta ina b le Inc o m e (De lo itte To uc he
To hm a tsu) ...512
6
Part 1 Prime Minister’s Speech
SPEECH BY HIS EXCELLENCY
PRIME MINISTER KAY RALA XANANA GUSMÃO
ON THE OCCASION OF THE PRESENTATION OF
THE BILL FOR THE
2009 STATE GENERAL BUDGET
7
Your Excellency the President of the National Parliament Illustrious Members of Parliament Illustrious
Members of Government Ladies and Gentlemen,
We are here today in this Great House to present the 2009 State Budget and Plan, as well as to clarify and
discuss, in this National Parliament, all questions put to us, within a truly democratic and accountable spirit,
meeting our institutional goal of making this proposal as aligned as possible with national needs and priorities.
The 2009 State General Budget responds to the urgent needs of the Country:
to accelerate administrative and
legal processes leading to national reconstruction and to the reduction of poverty, to enhance
economic growth and to enhance national development!
In this sense, the 2009 budget:
Is a budget that enables making vital decisions for the
development of basic infrastructures
in all
development sectors;
Is a budget that gives priority to the implementation of
regional development policies
, so as to reduce
poverty in rural areas and to distribute resources in such a way as to achieve a greater regional balance;
Is a budget that
invests in national human capital
in all its dimensions: investment in education and
professional training, in the fight against unemployment and in a greater protection to the purchase
power of families, in the continuation of social justice measures for the most vulnerable groups and,
consequently, in the strengthening of social cohesion.
Your Excellency the President of the National Parliament Illustrious
Members of Parliament
Present times are marked by troubling international events in economic and financial terms, resulting from the
international crisis that has been affecting, above all, the leading world economies. The growth forecasts for the
world economy are being revised downwards, with the IMF estimating that global growth in 2009 will be around
2.2%.
Developing countries have not registered losses as great in the financial sector, however they are still feeling the
consequences of tighter credits and a smaller demand for their exports. This gloomy and uncertain global
scenario is also contributing towards inflationary pressures, as we saw in the sudden increase of food and fuel
prices within the last few years, shooting inflation up to levels we had not seen for over a decade.
This impact was mostly felt in developing countries, and Timor-Leste was no exception. However, with the
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by the Timorese consumer would not increase along with the price of rice sold in international markets.
This measure, which was vital for the stability of the People, must be interpreted in a very clear and responsible
manner by all political agents in this Country, especially by those who insist on using crisis situations, with
consequences that may be dramatic for our population, to gain political influence in a most irresponsible
manner, to discredit this Government and to defend purely partisan interests.
Ladies and Gentlemen,
The Economic Stabilization Fund has achieved its goal
! It has prevented disturbances and popular
demonstrations similar to the ones we have seen in other countries. It has prevented food insecurity and
regulated the prices of rice, cement and other goods, just by showing that this Government would not allow
some more opportunistic traders to make use of speculative inflation to increase prices in our Country. The
existence of the Fund neutralized bad practises in our market!
More than preventing a situation of crisis with unpredictable consequences, this instrument for monitoring price
pressure has achieved its mission of stabilization. Also, as we promised, out of the 240 million approved by this
National Parliament, we have used only the necessary amount for regulating the market, using public monies in
a wise and prudent manner.
This is another sign by this Government that the People can have confidence in our governance. We have used
only 29 million out of this Fund, returning the rest to the Treasury – this shows that
this Government is
rigorous and has budget discipline; that the priority of this Government is to protect the Timorese,
their families and their companies.
Your Excellency the President of the National Parliament Illustrious
Members of Parliament
Despite the international crisis, the Timorese economy is ready to keep on growing. Our 2009 plan relies on a
policy for maximizing expenses that create employment, making use of the policies that have been implemented
since this Government entered into office.
Step by step, we have begun to build solid foundations for the gradual growth of a resilient economy. If we
compare this process to the process of building a house, everyone will agree that if the foundations are not solid,
any stronger rain or wind will quickly bring the house to the ground.
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vital reforms in sectors that are the basis for good economic growth. Step by step, we have been paving the way
to include Timor-Leste in the ranking of the countries designated as emergent economies. To be more precise:
Firstly,
we have ensured political and social stability
, including the resolution of national security problems
and the introduction of a thorough reform in the sector of defence and security. Security and economic
development are connected, since only with peace, tranquillity and confidence will it be possible to develop the
activities required for the economic, social and political growth of the Country.
Secondly, we have carried out a
series of reforms within the administrative operations of the Government
and of the Civil Service
, as this is a vital component of the formal economy. In order to conduct economic
growth it is necessary to have technical capacity and administrative competence, i.e. productivity,
professionalism, integrity and efficiency in Public Administration. The maximum outcome of this achievement
by the Government is the creation of the Civil Service Commission, which will become operational later this
year.
Thirdly, we have approved and submitted to the National Parliament the
legislation for the creation of the
Anti-Corruption Commission
, which will have a fundamental role to play in improving good governance,
required for the correct mobilization of national resources towards economic growth.
Fourthly,
we have produced a series of legislative documents
that are essential for the development of
Timorese society, from which we can highlight: The Base Law on Education; The Tax Regime Law; a set of
Conventions under CPLP in the area of justice and within the scope of language; the Base Law on Witness
Protection; the Law on Martial Arts; the Law on Authorization in Penal Matters; the Statute of Public Defence;
as well as regimes of adoption; responsibility for minors; parental responsibility exercise; and, particularly
important for the area of Justice, the draft Civil Code already being discussed by the Council of Ministers.
Also being discussed by the Council of Ministers, and to be sent very soon to the Parliament, we have the new
Investment Law and the package of decentralization, which includes a legislation proposal on administrative and
territorial division, a legislation proposal on Local Government and a legislation proposal on Municipal
Elections.
Fifthly,
we have increased investment in the public sector
, financing new constructions, improvements in
public services and public transfer programs. These policies have improved the purchase power of the
population and indirectly benefited the private sector, as well as creating around 31 thousand fulltime jobs in
2008.
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stability.
Seventhly,
we have increased the agricultural production levels of some important crops
, doubling the
export value of coffee and achieving a 21% increase in the production of rice, as a result of the increase in the
cultivated area and of other measures taken by the Government to enhance agricultural production.
Eighthly, we have improved the
financial management processes and systems, and increased
significantly the budget execution rate
! The total budgeted for 2008, already including the rectification, was
548.3 million, excluding the Economic Stabilization Fund. From this amount, 365.1 million have already been
spent.
We must also consider the 29 million executed in the Economic Stabilization Fund and the
69.5 million as carryovers, adding up to 463.6 million, which were injected into our economy.
Illustrious Members of Parliament,
These figures speak for themselves! Our Government, in its first year of work, in 2008, within a process of
reforms and needing to solve countless social problems,
has managed to increase budget execution by
257%, comparing with the best execution in the past, which was 180 million in cash, in fiscal year
2006/7.
Ninthly,
we have carried out a financial reform to act according to the Law, respecting the best public
finance management practises
. Thus, since 1 January 2009 no State institution will be authorized to carry
funds over from previous year appropriations. Only during the present year, for purposes of adjustment and
adaptation to this new practise, will State institutions be allowed to pay capital development and minor capital
projects up to 28 February.
This reform will improve the connections between the State Budget and the actual economic activity, being
more transparent and enabling a better analysis of the economic activity and a better approach in relation to
activity planning.
These are just some examples that enable us to say that
indeed this Government has obtained results
!
Furthermore I must add that these results were obtained in particularly adverse conditions, in a year where most
the energy of this executive was spent in solving problems left to us by previous governments, in a year where
we suffered a most serious attack on our national sovereignty, in a year where foreign economic situations have
once again threatened our stability.
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“with your very own eyes” the new dynamic that streets, commerce, homes, schools and Universities have
recently acquired. Look at the young people, who are a vital component of our society, and deny, if you can, that
they are more united and closer to each other!
Your Excellency the President of the National Parliament Illustrious Members of Parliament Ladies and
Gentlemen,
We are seeing change! A change of attitudes and behaviours, a change of mentalities and a change of priorities:
the Timorese want stability and national development, and they are all willing to contribute towards it.
One of the reasons that motivated the people to demand this change was the fact that the Timorese could feel
that they were getting poorer every year. We all suspected this reality, but the recent work produced by the
World Bank and the Ministry of Finance on the national poverty index in Timor-Leste has confirmed that we
are poorer now than we were 5 years ago.
Between 2001 and 2007 the percentage of Timorese people living in poverty increased from 36.3% to 49.9% of
the overall population, meaning that over 200 thousand people were thrown below the poverty line, thus
increasing the number of poor people to half a million.
This sad legacy left to us by previous Governments is due to the lack of application of actual measures towards
economic development. Previous governments have simply failed in managing the economy and providing
opportunities for our People.
Therefore this Government has the moral duty to change the situation of poverty in which it found the Country.
A Country where half the population lives with less than 88 cents a day, and where half of these people are
children, suffering from hunger and malnutrition,
requires a Government that will work “day and night” to
change this situation
!
And this, Illustrious Members of Parliament, is what this Government has been doing. Thus I ask those who
were responsible for the situation in which they left the Country to, at least now, show some respect for our
work! For the good of the poor, for the good of democracy, for the good of the Country!
Between 2002 and 2006 there was a negative growth, even though oil revenues increased. In opposition to this,
the IMF estimates a growth of 8% in 2007 and a growth of 10% in 2008.
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and reducing poverty, as well as improving education and health systems.
Our 2009 budget policy is designed to take another step towards setting our foundations, thus enabling
economic growth, i.e. the development of basic infrastructures, as without infrastructures there can be no
development of the production sector, no increase in the Country’s competitiveness, and no increase in non-oil
revenues to free us from the dependence on our natural wealth for funding the State Budget.
With this 2009 budget, we want to achieve a real growth up to 10%
. Still, we do not want to leave it at that,
we have the vision and the strategy to grow even more, and this is the right time to make the decisions that will
enable us to achieve this.
Your Excellency the President of the National Parliament Illustrious
Members of Parliament
Ladies and Gentlemen,
The total expenditure by the State of Timor-Leste in 2009 is estimated at
$680.873 million
, with the total
non-oil revenues being estimated at
91.1 million
. The tax deficit is therefore
589.828 million
, which must be met through the Petroleum Fund.
As the sustainable income is estimated at
407.8 million
, the Government proposes to withdraw an amount
exceeding the Sustainable Income of the Petroleum Fund by
181.2 million
, in order to meet the tax deficit.
Illustrious Members of Parliament, the Government, like you, recognizes the extreme importance of the
Petroleum Fund as a source of wealth for our future generations. However, it also recognizes that our Country
cannot rely forever on this Fund to meet public expenses – on the contrary, we know that the only way to
overcome a stagnated economy that depends exclusively from the petroleum sector is to invest in other
products with potential to be exported, so as to level our trade balance, i.e. increase our exports in view of our
imports.
Yet, this cannot happen without public investment! Nothing will happen without the audacity and vision to
invest immediately in potential economic development areas, namely infrastructures, agriculture and fisheries,
tourism, education and professional training.
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year.
In order to contribute to this reflection, I would like to mention the following items:
Firstly, we have already demonstrated here the historical improvement in our budget execution, which is
undoubtedly something that gives us confidence to choose the path towards development;
Secondly, despite having spent a relatively large amount in 2008, the assets of the Petroleum Fund went from
about 1.6 billion dollars in August 2007 to 4.2 billion dollars in December 2008. It is estimated that the Fund
will continue to increase gradually in the medium term, adding up to 5.4 billion dollars by the end of 2009.
Although oil prices have been going down every day, this budget was calculated, as always, according to prudent
assumptions and reflecting international best practises, taking into consideration the volatility of oil prices. For
the period from 2009 to 2013 the calculations in terms of petroleum wealth and sustainable income are based on
a steady nominal oil price of USD 60 per barrel, therefore USD 10 per barrel below the prices used in the New
York Market Exchange for the period between December 2008 and December 2013.
This approach should be a sufficient guarantee against the overestimation of future revenues, in conformity with
the prudence requirements of the Petroleum Fund Law.
Thirdly, at present there is only one operational field in the Joint Petroleum Development Area, namely the
Bayu-Undan field, which is still in its initial production stage and which will generate revenues at least until 2023,
with these revenues being calculated under the low production scenario. However the calculation of petroleum
wealth also takes into consideration expected future revenues from petroleum resources still in the sea bed of
Timor Sea.
New and potential sources have been discovered in the Joint Area and in the area close to the sea of
Timor-Leste. Kitan, which was recently discovered, was declared to be commercially feasible by ENI, and should start
in 2010 – this field’s revenues may soon be included in the calculation of Petroleum Wealth, thereby increasing
even more the estimate balance of the Petroleum Fund. Also, in relation to the Greater Sunrise field, the
Government is seriously considering the option of bringing the pipeline and the Liquefied Gas plant into
Timor-Leste, and when this happens the additional revenues from the operations will flow into the Petroleum
Fund.
14
spent. Fourthly, the detail of the Annual Action Plans contained in this budget shows clearly the activities
sought by the Government, the consideration of the main priorities for the Country and the manner in which
the 2009 Plan is drafted, including investment in the productive sectors, without neglecting essential issues in
our society, such as gender equality, social inclusiveness – especially by young people – and the fight against
regional asymmetries.
I would also like to stress that we have already drafted the State of the Nation Report and we have begun to
draft the National Development Strategic Plan.
I am aware that we have not met the timings desired by the Illustrious Members of Parliament, but you must
understand that a plan such as this, in a Country with so many priorities, cannot be improvised! This Plan must
be coherent and duly considered, analysing all factors in detail, so that its implementation is a reality and not just
the completion of a requirement. In other words, we do not want to come here with a “fancy document” void
of content, but rather with a document that makes the difference for the Country, and this means it will have to
be executable!
Lastly, I would also like to say that the additional withdrawal from the Petroleum Fund is clearly justified by the
long term interests of Timor-Leste and of its citizens. We are investing in our agricultural and rural sectors,
developing our human resources base, establishing operation systems that encourage the development of private
sector, developing an integrated infrastructure plan (Timorese infrastructures are among the poorest in the
world) that includes the supply of power throughout the entire Country in the mid term, the improvement of
telecommunications, and the development of our ports, airports, roads, sewage and drinkable water distribution
systems.
Without these infrastructures, any agricultural, industrial or business development policy cannot succeed. What
is more, education and health cannot be provided as the People requested in the document Vision 2020 without
proper infrastructural support.
Evidently, if when this Government entered into office it had already found an Infrastructure Development
Plan ready to be implemented, and if the Country had already a minimum system of basic infrastructure, we
would not need to be here today justifying the need to use our natural resources on this structural project for
our Nation. Furthermore, everyone knows that public investment in infrastructures has shown to be, in all
countries in the world, an important engine for growth and employment creation. It is an expensive investment,
but one that is known to be profitable for future generations.
15
by the international community or, ultimately, by some kind of miracle.
Timor-Leste is a sovereign Country that is entitled to use its own resources, provided it does so in a balanced
and prudent manner. This is precisely what we are doing!
Your Excellency the President of the National Parliament Illustrious Members of Parliament Ladies and
Gentlemen,
The presentation of the State General Budget covers a combined sources budget that results from the
articulation with Development Partners in the obtaining of this information, and which for the first time also
covers information district by district concerning the sums to be invested in each one.
At this time, I would like to highlight the fact that the Government estimates to invest, outside of Dili, around:
28 million in pensions for National Liberation Fighters, elderly persons and vulnerable groups;
26 million for paying wages to staff members;
50.5 million in new projects identified specifically in the districts;
3.14 million in local and suco administration;
3.34 million in school grants (including school meals) to benefit students; and
1.7 million in other grants in the areas of arts, sport and alternative energy sources;
These are measures for combating poverty in rural areas, including greater support to agricultural initiatives
through more and better infrastructures, seeds, fertilizers and equipments for enhancing productivity. This
policy follows measures already implemented in 2008, such as the decentralization of services to farmers,
materialized in the construction of 8 Regional Centres and in the absolute priority of the purchase of their stocks
by the Government, in detriment of importing goods.
Also, at district level, we will be implementing 3 Regional Health Centres to provide decentralized education
services, 5 new Professional Training and Employment Regional Offices, 8 Notary Offices to provide civil
registration services, as well as new initiatives in terms of Integrated Health Services. Furthermore we will be
building new Maternities, 3 Community Health Centres and 14 new Health Posts, along with lodging. These
measures are associated with the establishment of Local Government, through the establishment of
district-elected Municipal Assemblies.
16
With all these projects, we expect to create over 26 thousand jobs!
Ladies and Gentlemen,
Public investment in human capital is an essential condition for national development
. Therefore, in
addition to sector-crossing institutional capacity building actions, the 2009 budget considers the attribution of
public grants of around 2 million towards activities directed specifically to young people, within the scope of the
Secretary of State for Youth and Sport, as well as the attribution of Scholarships in the amount of 1 million to
Timorese persons, to study in the area of natural resources.
Within the scope of the Secretary of State of Professional Training and Employment, we will be starting 4 new
transfer programs in the amount of $2.55 million, throughout four years, including the Temporary Labour
Program, which will employ and qualify around 6,900 young people (50% women), support the National Centre
of Professional Training in Tibar and other Professional Centres, as well as train around 3,000 persons in
Korean language, so that they can access to foreign labour market.
In the area of education, the implementation of the Base Law on Education, together with the construction and
rehabilitation of schools and universities and with the capacity building of teachers in several areas, will
contribute to create a workforce better prepared and qualified to play a relevant role in the development of the
Country.
Other vital sectors for national development will be covered by training and professional capacity building
programs, either directly through public investment or through international partnerships, such as tourism,
trade, industry, companies, primary sector, security and justice.
In relation to the sector of justice, I would like to underline that 2009 will see the start of the capacity building
for the police in terms of criminal investigation, as well as the training of Timorese staff in order to set up a
Chamber of Accounts, which is a fundamental step for verifying the legality of public expenses and the
judgement of State accounts, in conformity with the Constitution of the Republic.
Lastly, because we consider that investing in human capital is first and foremost investing in the people who are
the starting engine of the economy, from 2009 on we will be paying special attention to civil servants, namely
those who manage and administrate public investment.
This is achieved through the Civil Service Commission, which I have already mentioned today, but also through
training and institutional capacity building programs, and just as important through reforms in terms of their
wages, which will contribute towards greater motivation, greater commitment and greater accountability.
17
their tasks with greater efficiency and greater professionalism.
The increase in salaries and wages, which go from a total of 58.9 million in 2008 to 93.1 million in 2009,
according to the implementation of new Career Regimes, is a measure that seeks to benefit these staff members
according to their merits, and consequently benefit every citizen of Timor-Leste.
Still, I must underline the responsibility that is given to them. Civil servants, presently rewarded for their service
to the Nation as administrative officers or managers, as security and defence officers, as holders of public
offices, as health professionals, as teachers – are responsible for improving the living conditions of all Timorese.
They must be aware of this responsibility and they must bring credit to their profession!
Ladies and Gentlemen,
2009 will be the year of decision in relation to infrastructure projects. This will entail the drafting of a project
development and implementation plan covering roads, bridges, ports, airports, dams, electricity and basic
sanitation.
A stable and regular supply of electricity is vital for developing industry and improving the lives of the
Timorese
.
Timor-Leste will build two power plants, with staged schedules for completion. It is estimated that by late 2009
all districts will have power 24/7, and that by late 2010 this will be extended to all sub-districts.
Furthermore, ten transforming stations will be built in the Country, namely in Dili, Baucau, Liquica, Manatuto,
LosPalos, Viqueque, Same, Maliana, Suai and Bobonaro. A total 630 kilometres of overhead power lines will
also enable national distribution.
In addition to enabling the development of many other employment-generating sectors, this project will in itself
create over 20 thousand jobs already in 2009.
This electricity project will not be an isolated project, but rather part of a broader strategy to be presented during
2009 and that will include surveys and feasibility studies for the implementation of projects, along with the
socialization and establishment of financial, technical and legal mechanisms, in order to start the projects
considered as top priority.
18
acquisition of patrol boats for maritime security and the improvement of border security posts, among other
projects.
Ladies and Gentlemen,
This year is marked by the celebration of the 10
thanniversary of the Referendum, where the Timorese have
voted for National Sovereignty and Independence! In average, ten years is the time that countries with a history
similar to ours take to emerge from post-conflict situations.
If we can now manage to put the Country on the right track, with national stability and unity, moving towards
development, we can move away definitively from a gloomy setting of conflict and poverty.
This can only be achieved through strategic policies that conciliate short term needs with medium and long term
needs. This will require work and willingness by all Timorese people.
Therefore we thank the Illustrious Members of Parliament for their constructive contributions, making this draft
2009 Budget Plan a turning point in the fight against poverty in its various aspects, as well as putting
Timor-Leste on the path towards sustainable development.
I count on your dedication, cooperation and energy to meet this vital NATIONAL CHALLENGE
!
19
Part 2 Executive Summary
The Combined Sources Budget
The Combined Sources Budget for 2009 is estimated to be $902 million, this is made up of $681m in State Budget
expenditure, and an estimated $221m in spending by Timor Leste’s development partners. Funds from development
partners exclude the cost of the security services provided by the International Stablisation Force (ISF) and the United
Nations Police (UNPOL). Tables 2.1 and 2.2 provide a summary of the combined sources budget from the Transition
period 2008 to 2012.
Table 2.1
Combined Sources Budget 2008 to 2012 ($m)
2008
Estim ate 2009 Budget
2010 Projection
2011 Projection
2012 Projection
Total 4 Years
Revenue 242 312 177 143 138 770
Domestic Revenue 51 84 45 52 60 240
Direct Budget Support - - - - - -Autonomous Agency Revenue 7 7 9 13 36 65
Confirmed Donor Funding 184 221 123 79 42 465
Expenses 564 902 793 674 524 2,893 Recurrent Expenditure 494 679 544 502 491 2,215 State Budget Funding 327 476 430 434 452 1,792 Confirmed Donor Funding 167 203 113 68 39 423
Capital Expenditure 70 223 250 171 33 677
State Budget Funding 53 205 240 161 29 636
Confirmed Capital Funding 17 18 9 11 3 42
Financing Transfer f rom the Petroleum Fund 396 589 - - - 589
Existing Cash Reserves 74 (1) - - - (1)
Table 2.2
Financing of the Combined Sources Budget 2008 to 2012 ($m)
2008 Estim ate 2009 Budget 2010 Projection 2011 Projection 2012 Projection Total 4 years Total State Revenue 2,569 1,344 1,314 1,492 1,466 5,617 Total State Expenditure 380 681 671 595 482 1,441 Fiscal Balance 2,189 663 644 897 984 4,176 Non Petroleum Fiscal Balance (392) (625) (616) (531) (403) (2,176) Conf irmed Funding f rom Development Partners 184 221 123 79 42 465 Total Combined Sources Spending 564 902 793 674 524 1,905Over the period 2009 to 2012, a total of $465 million will be provided from external sources to support the Government
sector and its core activities.
20
The Economy
The Timorese domestic economy is poised for continued growth despite difficult conditions elsewhere in the world.
Through improvements in budget execution, public sector spending will continue to provide a strong stimulus to overall
demand. Moreover, as the composition of public sector expenditure shifts towards much needed infrastructure
development, each dollar of public spending will have a greater impact, with more jobs being created and acting as a
lever for attracting complementary private investment and activity. Given the size and composition of the budget, it is
expected that non-oil GDP will continue to grow by 10% in real terms during 2009. This follows an estimated growth
rate of 8% in 2007 as the economy recovered from the 2006 crisis.
The increase in public sector expenditure has funded new construction, improvements in public services, and transfer
programs that have raised the purchasing power of the population. Indirectly, by raising demand, public sector
expenditures also helped support strong growth in the private sector. There are strong anecdotal signs that investors
have been further buoyed by the improved security environment. Going forward, the mid-2008 reform program that
reduced direct and indirect taxes and import duties should provide additional incentives for future private sector
growth.
The agricultural sector has benefited from favourable weather conditions and an increase in the area under cultivation
and harvest. As a result, production levels are up markedly for some key crops. Coffee exports in the first nine months
of 2008 reached almost 14 thousand tons, double the amount of previous years. Rice production during the 2007-08
season grew by 21% from the previous year. The increase in production has mainly resulted from an increase in the
actual harvest area. In 2007-08 40,577 hectares were harvested for a production of 67 thousand tonnes of paddy
compared to 31,386 hectares harvested in 2006-07 for 55 thousand tonnes of paddy. Further increases in production
are expected in 2009, as measures to boost agricultural activity undertaken by the Government in 2008, such as the
regional agricultural centres and improved mechanisation, begin to be utilised and result in improved productivity.
Consumer prices rose by 9.1% in the year to September 2008, more than double the rate in 2004-2006 but down from
a peak of over 10% in June 2008. Most of the rise in inflation over the past two years can be attributed to higher food
and fuel prices, which have been affecting countries around the world.
High domestic inflation has been a concern but now appears to be abating. The price of rice and other commodities
has now come down in international markets and this should help moderate inflationary pressures going forward.
Moreover, Timor-Leste’s consumers will benefit in the short term from the recent appreciation of the USD against the
currencies of those nations from which Timor-Leste sources its imports.
Up to 2007, Timor-Leste had yet to experience progress in poverty alleviation and in the achievement of the
Millennium Development Goals (MDGs). The 2007 Timor-Leste Survey of Living Standards (TLSLS) conducted by the
National Directorate of Statistics and the World Bank shows that approximately 50% of the population lives below the
poverty line. That is a significant increase from the 36% of the population estimated to have been below the poverty
line in 2001.
The TLSLS finds that the increase in poverty has been entirely due to a decline in average consumption per capita
from $42 per month to $31 per month, a 26% fall).
21
Revenue, Sustainable Income and the Petroleum Fund
2008 is expected to be a very good year in terms of total revenue due to the unexpected increase in oil revenues
resulting from the increased price of oil. Given the recent sharp decline in oil price, total petroleum revenue for 2009
is expected to fall by $1,257 million relative to the high levels of estimated revenue collections in 2008 Total
petroleum revenue is estimated to fall from an estimated total of $2,510 million in 2008 to $1,253 million in 2009. Non
petroleum revenue is estimated to increase from an estimated total of $59 million in 2008 to $96 million in 2009.
Table 2.3
Total Revenue 2008 to 2012 ($m)
2008
Estimated Petroleum Revenue and Sustainable Income 2007-2012 ($m)
2008 Sustainable Revenue 396.0 407.8 401 401 400 Actual Widthdraw al f rom Petroleum Fund 396.0 589.0 401 401 400 Financing Requirement Cash Deficit 391.6 625.2 616 531 403Table 2.5
Estimated Balances of the Petroleum Fund 2008 to 2012 ($m)
2007General Budget of the State for Timor-Leste
22
The Government has for the first time in the 2009 State Budget published information on the budgetary impact of its
activities by District.
Outside of Dili the Government estimates that it will be:
•
providing $28.1 million in pensions to the aged and vulnerable, and former combatants in the struggle for
liberation;
•
spending approximately $25.7 million making payments to employees;
•
investing approximately $50.5 million in new projects specifically identified in the districts; and
•
providing approximately $6.9 million in public grants to sucos and primary schools in the districts outside of Dili,
•
Chart 2.1 illustrates the distribution by district on a per capita Basis of direct Government spending.
Chart 2.1
Government Spending in the Districts on a Per Capita Basis
Table 2.6
Budget of the State Whole of State Aggregate Figures 2008 to 2012 ($m)
2008 Es tim ate
2009 Budget
2010 Projection
2010 Proje ction
2011 Projection
Total 4 ye ars
Total Expe nditure 380 681 664 588 475 2408
Salary & Wages 52 93 95 98 101 387
Good & Services 176 248 224 229 235 936
Minor Capital 19 38 31 24 25 118
Public Transfers 81 96 81 83 92 352
Public Debt Interest 0 0 0 0 0 0
Capital Development 53 205 234 154 23 616
Salaries
Major reforms with implications for public sector salaries and wages were completed in 2008. This has resulted in a
total salary budget of $93 million in 2009. The reforms include:
•
implementation of the new career regime for civil servants;
23
•
implementation of new remuneration system for defence and security forces;
•
reform of salaries for holders of public office;
•
introduction of allowances for health professionals;
•
re-categorisation of allowances previously included within goods and services such as overseas living allowance
for diplomats (note – this increase in salaries is offset by a decrease in the goods and services category);
•
payment of teachers of non government schools;
•
introduction of new institutions; and
•
additional staff being employed in existing Ministries and Institutions.
Goods and Services
A total of $248 million has been provided for goods and services budgeted for 2009. Major items in the goods and
services budget include:
•
long term food security;
•
fuel to subsidise power generation;
•
costs associated with the operations of the PNTL and FFDTL;
•
costs associated with school materials and consumables;
•
payment of Government Tax Liabilities;
•
payments for Cuban Health Professionals; and
•
general running costs of the State.
Public Transfers
The Government will be making over $96 million in public transfer payments during 2009. These include public grants
of $63 million which include the finalisation of the payments to IDP’s and $33 million for pensions and subsidies to:
•
former holders of public office and former members of government;
•
the aged and the vulnerable; and
24
Capital Expenditure
As 2008 marked the beginning of a period of stabilisation and initial reform of public institutions so 2009 marks the
beginning of a period in which Timor-Leste will begin to invest in the infrastructure needed to ensure the future
prosperity of the nation.
Currently, Timor-Leste lacks basic infrastructure in all sectors. Roads are inadequate and crumbling, water both for
human consumption and agriculture is often in short supply, reliable sanitation is rare, communications by air and sea
are inadequately served, telecommunications are patchy and costly and electricity remains a distant dream for many
Timorese whilst many of the rest suffer from intermittent and unreliable power.
25
Table 2.7
General Budget of the State Timor-Leste 2008 to 2012 ($m)
2008 Estim ate
2009 Budget
2010 Projection
2011 Projection
2012 Projection
Total 4 Years General Governm ent
Revenue 2,561.8 1,337.3 1,305.1 1,479.4 1,447.1 5,568.9
Petroleum Revenue 2,510.4 1,253.1 1,260.2 1,427.8 1,387.5 5,328.6
Taxes and Royalties 2,336.7 1,138.0 1,074.4 1,219.3 1,149.2 4,580.9
Petroleum Fund Interest 148.9 90.1 156.9 184.8 214.6 646.3
Other Petroleum Revenue 24.8 25.0 28.9 23.7 23.8 101.4 Domestic Revenue 51.4 84.2 44.9 51.6 59.5 240.3
Direct Tax 15.4 11.1 13.0 15.4 18.2 57.6
Indirect Tax 21.0 38.2 21.4 25.3 29.8 114.7
User Fees 11.1 31.5 6.9 7.5 8.0 53.9
Interest 4.0 3.5 3.5 3.5 3.5 14.0 Direct Budget Support - - - - -
-Operational Expenditure 207.2 337.6 308.2 309.7 319.0 1,274.5
Salaries and Wages 50.3 92.1 93.3 96.3 99.2 381.0 Goods and Services 139.5 209.5 187.2 192.2 197.9 786.8 Minor Capital 17.4 36.0 27.6 21.1 22.0 106.7 Public Debt Interest - - - - -
-Public Transfer Paym ents 81.1 96.4 80.7 83.3 91.6 351.9
Grants to Organisations/Individuals 59.5 63.0 36.2 28.9 32.1 160.1 Personal Benef it Payments 21.6 33.4 44.5 54.4 59.5 191.8
Capital and Developm ent 45.8 196.1 232.6 154.1 22.6 605.4
Infrastructure and Physical Development 45.8 196.1 232.6 154.1 22.6 605.4 Equity Injections/Purchase of Financial Instruments - - - - -
-Subsidies to Autonom ous Agencies 39.0 43.8 39.9 35.2 29.7 148.7
Operational Subsidies f or Autonomous Agencies 32.0 34.6 32.2 28.7 23.0 118.4 Capital Investment for Autonomous Agencies 6.9 9.2 7.7 6.6 6.7 30.2
General Governm ent Budget Balance 2,315.6 663.3 643.8 897.2 984.1 3,188.4 Autonom ous Agencies
Total Revenue 46.1 50.7 49.1 48.0 48.5 196.3
Transf ers from General Government 39.0 43.8 39.9 35.2 29.7 148.7 Autonomous Agencies Charges 7.1 6.9 9.2 12.8 18.8 47.7
Operational Expenditure 39.1 41.5 41.4 41.4 41.8 166.1
Salaries and Wages 1.3 1.7 1.7 1.5 1.6 6.4 Goods and Services 36.3 37.7 36.8 36.9 37.0 148.4 Minor Capital 1.6 2.1 3.0 3.0 3.2 11.2 Public Debt Interest - - - - -
26
Table 2.8
Estimated Cash Flows for the State Timor-Leste 2008 to 2012 ($m)
2008 Estim ate
2009 Budget
2010 Projection
2011 Projection
2012 Projection Cash Balance at Start of the Year
Treasury Account at Beginning of Year 180.9 178.2 135.1 125.9 113.1 Autonomous Agencies Accounts Beginning of the Year 27.6 34.7 41.6 50.8 63.5
Total Cash Balance at Start of Year 208.5 212.9 176.7 176.7 176.7 Cash Inflow s during the Year
Non Petroleum Revenue (Excl Auto Agency) 51.4 84.2 44.9 51.6 59.5 Autonomous Agency Revenue 7.1 6.9 9.2 12.8 18.8 Sustainable Transf ers from the Petroleum Fund 396.0 407.8 400.8 400.6 400.4 Extraordinary Transf ers from the Petroleum Fnd - 181.2 - - -Borrow ed Funds - - - - -Unconf irmed Financing Source - - 215.6 130.0 3.0
Total Cash Inflow s for the year 454.5 680.0 670.5 595.0 481.7 Total Cash Outfllow s for the Year
Expenditure relating to previous years obligations 70.0 35.4 - - -Expenditure relating to current year appropriations 380.1 680.9 670.5 595.0 481.7
Total Cash Outflow s for the Year 450.1 716.3 670.5 595.0 481.7 Total Cash Balance at End of Year
Treasury Account at End of Year 178.2 135.1 125.9 113.1 94.3 Autonomous Agencies Accounts at End of the Year 34.7 41.6 50.8 63.5 82.3
Total Cash Balance at End of Year 212.9 176.7 176.7 176.7 176.7
Table 2.9
Financing of the General Budget of the State Timor-Leste 2008 to 2012 ($m)
2007 Actual
2008 Estim ate
2009 Budget
2010 Projection
2011 Projection
2012 Projection
Total 4 Years Total Petroleum Revenue 707.2 2,561.8 1,337.3 1,305.1 1,479.4 1,447.1 5,616.5 Total Non Petroleum Revenue 40.9 58.5 91.0 54.1 64.4 78.3 287.9 Total Cash Expenditure (Incl Prev Yrs Liabilities) - 450.1 716.3 670.5 595.0 481.7 1,440.6 Fiscal balances
Whole of State Fiscal Balance 707.2 2,111.7 621.0 634.6 884.4 965.3 3,105.3 Whole of State Fiscal Balance Non Petroleum 40.9 (391.6) (625.2) (616.4) (530.6) (403.4) (2,175.7)
Total Financing Requirem ent (40.9) 391.6 625.2 616.4 530.6 403.4 2,175.7
Cash Required from the Petroleum Fund (40.9) 396.0 589.0 - - -Financing from Borrow ings - - - - - -Financing from Existing Cash Balances - (4.4) 36.2 - -
-Financial Position of the Governm ent
