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Introduction
Located in the easternmost part of the Lesser Sunda Islands in South-east Asia, East Timor covers an area of 14,874 square kilometres. The country is divided into 13 districts and has a population of 1.2 million, with only a small number of Chinese. The capital Dili, located in the island of Timor, is a deep water port and the political, economic and cultural centre of East Timor.
East Timor imposes no foreign exchange controls and allows free capital flow. The common currency is the US dollar. East Timor’s main natural resources include gold, manganese, chromium, tin and copper. The Timor Sea has rich reserves of oil and natural gas, and about 80% of the country’s fiscal revenue comes from the sale of oil and natural gas.
Since 2009, East Timor has maintained a stable political situation, continuously improved its public order and achieved a steady economic growth. To further accelerate the development of industrial and manufacturing industries, in recent years, the government has engaged in the construction of roads, airports, ports, public utilities, telecommunication infrastructure, agricultural facilities and other projects.
Investment Environment
Trade Invest Timor-Lest is the department responsible for investment in East Timor, which is affiliated to the Department of Trade, Industry and Environment. To attract foreign investment, the East Timor government has launched a series of preferential policies for exemption and reduction of tariffs and sales taxes. Investments in different regions in the country are exempted from charges for lease of state-owned land, and taxes payable are reduced or exempted at a certain percentage for employment of local workers. In 2013, the government passed a resolution to set up the special economic zone in Oecussi, where enterprises enjoy a preferential treatment of “one policy for one enterprise” apart from the existing tax incentives.
In addition, the East Timor government also encourages locals to set up foreign-local joint ventures, but there are currently no related procedures for foreign acquisitions and the operational processes have to be improved and there is no local professional organization providing such consulting services, so most  foreigners set up their businesses as sole proprietorship.
The East Timor government has emphasized on attracting foreign investments. In recent years, it has promulgated a series of laws and regulations to improve the investment environment, including the Labour Law, the National Investment Law, the Foreign Investment Law, the Commercial Registration Law, the Health Law for Inspection and Quarantine of Import and Export Goods and the Land Law.
In 2008, the East Timor government started to reform the tax policies to build East Timor into one of the countries with the lowest tax rates in the world. Through reducing tax and simplifying the tax payment process, the government is striving to stimulate domestic economic growth, promote domestic and foreign investment and reduce the economic burden for low-income earners. At present, the main taxes are service tax, excise tax, sales tax, import duty and income tax.
Economy and Trade
According to the statistics, the major trading partners of East Timor are Indonesia, Malaysia, Singapore, China, Vietnam, Japan, Australia and other countries. East Timor mainly exports oil to other countries; meanwhile, the exports of coffee have also increased in recent years.
According to Chinese customs statistics, the products exported by China to East Timor mainly include: electrical and mechanical products, automobiles and steel, while the products imported by China from East Timor mainly include: mechanical and electrical products, wood, plastic products, coffee and tea.

Annual Indicators

2013(a) 2014(a) 2015(a) 2016(b)
Area Sq Km 14,609 14,609 14,609 14,609
Population (m) 1.1 1.2 1.2(b) 1.2
GDP at market prices (US$ bn) 5.596 4.175 4.167(b) 4.160
Real GDP growth(%) -13.9 -27.0 -2.2(b) -1.7
Consumer price inflation (av;%) 11.2 0.4 0.6 -1.3
Exports of goods fob (US$ m) 17.7 15.5 18.0 (-)
Imports of goods fob (US$ m) -696.2 -764.2 -652.9 (-)
Current – account balance (US$ m) 2,390.0 1,106.20 238.40 (-)

(a) Actual (b) EIU estimates

Main Destinations of Exports and Imports

Main Destinations of Exports (2015) (b) % of total
Singapore 92.0
Japan 2.0
Germany 1.0
Main Origins of Imports (2015) % of total
Indonesia 36.0
Singapore 25.0
China 18.0

(b) Excluding re-exports

Principal Exports (2014) (a) US$ m Principal Imports (2014) US$ m
Coffee 13.8 Mineral Fuel 159.9
Vehicles 74.9
Cereals 32
Machinery & parts 31.6

Mainland China-East Timor Bilateral Trade (US$ 10,000)

Year Total Exports* Imports*
2014 6044 6034 10
2015 10526 10453 73

* China’s export value to East Timor
** China’s import value to East Timor

Trade between Macau –East Timor (Mop)

Year Total Export* Import**
2013 114,142 0 114,142
2012 831,871 0 831,871

* Macau’s export value to East Timor
** Macau’s import from East Timor

Source:

  • Guide for Countries and Regions on Overseas Investment and Co-operation – East Timor
  • Chinese Academy of International Trade and Economic Co-operation of Ministry of Commerce
  • Investment Promotion Agency of Ministry of Commerce
  • Economic and Commercial Counselor’s Office of the Embassy of China in East Timor
  • China Statistical Yearbook 2016
  • The Economic Intelligence Unit – Country Report
  • The Macau Statistics and Census Department