Can Tourism Become the New Economic Driver for Timor-Leste?

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ASEAN Beat | Economy | Southeast Asia

Can Tourism Become the New Economic Driver for Timor-Leste?

Tourism could help drive Timor-Leste’s economy forward long after oil and gas have run their courses.

Can Tourism Become the New Economic Driver for Timor-Leste?
Credit: Flickr/ Graham Crumb

Bali is expected to have a total of more than 6.7 million foreign visitors in 2019. Such enormous numbers are achieved by reputation, word of mouth, and travel media such as the U.S. magazine Travel & Leisure, naming it one of the 10 best islands in the world to visit.

The reasons for Bali’s success are diverse. This one small island offers visitors bars and nightlife, unspoilt scenery, ecotourism, trekking, beaches, diving and snorkeling, sea life tours, and a host of cultural attractions and luxury resorts in a perceived safe environment.

Bali is vital to Indonesia’s economic stability. For Indonesia, tourism provides a sustainable – and growing – income stream as oil and gas exports weaken. Since 2003, tourism has delivered a long-term average growth of rate of more than 3 percent per annum and is now worth more than $10 billion annually. It is estimated that 20 percent of the Bali population, which is nearly a million people, are employed in, or dependent upon, the tourism industry for income.

Only 1,000 kilometers to the east of Bali is Timor-Leste.

Like Bali, it sits at the base of Southeast Asia, one of the most densely populated regions on earth. Timor-Leste has unspoilt mountains, crystal clear waters, pristine beaches, some of the best diving in the world on Atauro Island, and a population of 1.3 million with an average age of 20 years old, completing school and seeking work.

Currently, the country’s dominant exports are crude petroleum (around 88 percent) and coffee (6 percent), and in the not too distant future, if all goes well, increased oil and gas revenue from the Timor Sea’s Greater Sunrise fields.

Xanana Gusmão and the Timor-Leste government delivered an enormous win to their country to secure the controlling share of Greater Sunrise, and it will provide a secure financial base for this emerging nation. The genius of this purchase is that they have secured options that allow them to control their own destiny.

Once oil and gas production begins, the government will have achieved their goal of building a southern coast processing plant, and they would be in a position to sell their share in the functioning operation for a sizable profit if they decide to. There would be many interested parties for such a deal and the profits would provide a much-needed cash injection for nation-building projects.

These extractive industry products are particularly useful because they offer a significant and fast boost to an economy – but they have a limited lifespan as fields inevitably run dry. The Timorese people should quite rightly see Greater Sunrise revenues as an opportunity to fast-track the building of roads, hospitals, schools, and other essential services. But there should be a sense of urgency to move on developing this, fast. The global oil and gas corporate sectors are increasingly leading the move away from carbon-based energy sources to renewables. This was evidenced by Saudi Arabian Crown Prince Mohammad bin Salman’s decision in November 2019, to list their national oil company, Aramco, with less than expected uptake. Even Saudi Arabia, the world’s largest producer of crude oil, has decided to diversify away from oil.

Speak to any economist who does not have an agenda that influences them to ignore climate science data, and you will hear that oil and gas are not ideal commodities upon which to be predominantly reliant for a stable future economy.

On another front, the extractive resources industry is increasingly driven by automation, and research shows that employment in the sector is on the wane. Education is costly, and in a nation with limited funds like Timor-Leste, I would like to see education investment directed across diverse vocational careers that provide longevity and flexibility. Once there is a more highly trained workforce, this potentially leads to the growth of a new revenue stream, where trained Timorese will work overseas and send money home to their families, like the Philippines.

To help build a sustainable, diverse economy, one sector that is virtually invisible at the moment in Timor-Leste is tourism. This could be developed now and continue long after oil and gas have run their courses. Furthermore, it can employ men and women equally, and it capitalizes on the country’s abundant natural resources – both human and physical – without depleting them.

Internationally, the tourism and hospitality sector employs 70 percent women and 30 percent men, making it an extremely positive sector for a developing and young nation like Timor-Leste.

Research shows that if you wish to build a prosperous developing nation, employing women is the key. In late 2018, a study by the International Monetary Fund (IMF) concluded that bringing more women into a labor force brings more significant macroeconomic gains to the economy than if you were to add the same number of male workers. The IMF reported that up-skilling and educating women, and so lowering the gender gap, could increase a developing nation’s GDP by up to 35 percent. Eighty percent of these gains come simply from new workers entering the labor force; the remaining 20 percent stems from the results of gender diversity on productivity.

As the government of Timor-Leste recognizes in their Strategic Development Plan, 2011 to 2030, diversity of various types in their growing economy is essential to the country’s long-term stability. This plan is a wonderfully detailed and well-thought-out document that provides a blueprint for the Timorese people’s future.

To support this plan, I believe the Timor-Leste government could commit to the tourism sector’s development through public-private partnerships. Initial partnerships could be with airlines and international tourism operators, which I am sure would welcome the opportunity to be involved in such a promising new market.

From the Bali experience, we know that tourism delivers multiple benefits: foreign exchange, a market for local food products and services, increased community income, increased job opportunities leading to low unemployment, higher tax revenue, and a higher standard of living. It also preserves and grows local craft and cultural products.

If Timor-Leste could secure just 5 percent of Bali’s foreign tourism, it could bring in 335,000 international visitors. With an average spent of $1,000per person that would bring in $335 million per annum. That level of tourism would create employment for many thousands of people, perhaps tens of thousands. In turn, this helps bring increased job security, greater prospects and stability amongst the country’s currently unemployed youth.

I am reassured to see that I am not alone in my views. In the past two weeks there have been two reports identifying tourism as a priority sector for diversity and growth. The first is from the Australian Strategic Policy Institute (ASPI), the second is from the World Bank, in which International Finance Corporation’s Country Manager for Indonesia, Malaysia, and Timor-Leste, Azam Khan, succinctly summarizes the situation:

The potential areas for boosting private sector participation include agribusiness and tourism, which will support economic diversification and help create needed jobs for people to realize their potential. In addition, the role of the private sector in improving access to finance will help small and medium sized enterprises, especially women-owned enterprises, expand.

The Timorese people are quite rightly incredibly proud of their beautiful country and what they have achieved in such a short time since independence. A growing tourism sector would harness that enthusiasm and help promote Timor-Leste to the world and share its story, beautiful sights, sounds, and culture.

Sakib Awan moved to Timor-Leste in 2002 and founded the business, East Timor Trading with his wife, Neelo. He retired in 2016 and is now Chairman of East Timor Trading while living in Sydney, Australia.