The Timor-Leste Petroleum Fund was established in 2005, and by 2011 it had reached a worth of US$8.7 billion. East Timor is labelled by the International Monetary Fund as the “most oil-dependent economy in the world”. The Petroleum Fund pays for nearly all of the government’s annual budget, which increased from $70 million in 2004 to $1.3 billion in 2011, with a $1.8 billion proposal for 2012. East-Timor’s income from oil and gas stands to increase significantly after its cancellation of a controversial agreement with Australia, which gave Australia half of the income from oil and gas from 2006.
The country’s economy is dependent on government spending and, to a lesser extent, assistance from foreign donors. Private sector development has lagged due to human capital shortages, infrastructure weakness, an incomplete legal system, and an inefficient regulatory environment. After petroleum, the second largest export is coffee, which generates about $10 million a year. Starbucks is a major purchaser of East Timorese coffee.
9,000 tons of coffee, 108 tons of cinnamon and 161 tons of cocoa were harvested in 2012 making the country the 40th ranked producer of coffee, the 6th ranked producer of cinnamon and the 50th ranked producer of cocoa worldwide.
The agriculture sector employs 80% of East Timor’s active population. In 2009, about 67,000 households grew coffee in East Timor, with a large proportion of those households being poor.
The Portuguese colonial administration granted concessions to the Australia-bound Oceanic Exploration Corporation to develop petroleum and natural gas deposits in the waters southeast of Timor. However, this was curtailed by the Indonesian invasion in 1976. The resources were divided between Indonesia and Australia with the Timor Gap Treaty in 1989. East Timor inherited no permanent maritime boundaries when it attained independence. A provisional agreement (the Timor Sea Treaty, signed when East Timor became independent on 20 May 2002) defined a Joint Petroleum Development Area (JPDA) and awarded 90% of revenues from existing projects in that area to East Timor and 10% to Australia. An agreement in 2005 between the governments of East Timor and Australia mandated that both countries put aside their dispute over maritime boundaries and that East Timor would receive 50% of the revenues from the resource exploitation in the area (estimated at A$26 billion, or about US$20 billion over the lifetime of the project) from the Greater Sunrise development. In 2013, East Timor launched a case at the Permanent Court of Arbitration in The Hague to pull out of a gas treaty that it had signed with Australia, accusing the Australian Secret Intelligence Service (ASIS) of bugging the East Timorese cabinet room in Dili in 2004. East Timor is part of the Timor Leste–Indonesia–Australia Growth Triangle (TIA-GT).
In East Timor, transportation is reduced due to the nation’s poverty, poor transportation infrastructure, and sparse communications networks. The general condition of the roads is inadequate, and telephone and Internet capabilities are still limited, especially in the countryside. The country has six airports, one of which has commercial and international flights. There are no railroads in East Timor.
East Timor has a road network of 6,041 km, of which about 2,600 km of roads are paved, and about 3,440 km are unpaved.