The dependence on oil in Timor Leste terrifies me. It is an extremely frightening reality that so many developing economies face. 82% of the country’s budget comes from oil and gas revenues. About 10% of the budget is subsidizing education costs making for high urbanization rates and loss of labor on rural farms. In fact, 24% of the country’s 1.2 million people are currently students. Only 31% are employed adults, of whom 63% are subsistence farmers. With a country so dependent on agriculture for food and livelihoods, only $40 million is spent on agriculture each year (compared with $140 million on education).
The investment in education, healthcare, infrastructure and even some agriculture would be great if the country’s revenue sources were sustainable. Unfortunately, oil and gas income peaked in 2012. Not only are prices low but production levels are falling and Timor-Leste’s reserves are expected to be completely depleted in the next 5-10 years.
This scares me. This is something that our team certainly cannot have power over. This is something with no real solution. This is a reality that not only prevents people from overcoming poverty but could push them even further back and become a source for civil unrest, especially should unemployment continue to increase in Dili as a result.
This is when we need to remember that there are small things we can do that can make a difference even to a few. After talking to anyone who would speak with us and getting to know the lives of farmers in rural locations, our team came up with a couple ideas where we can maybe drive value in the agriculture sector to help diversify the economy away from oil & gas.
Our first hypothesis is through organic food processing. Timor-Leste can never compete on price for two reasons: it uses the US Dollar and it has low production levels. So what does Timor have that it could win with? It has some of the best, natural growing conditions. Being part of the spice islands and being chemical free makes Timor a desirable place for organic, all natural food and beauty products. East Timor can compete on specialization and unique, high-quality organic products. Goods such as turmeric, peppercorn, coffee, candlenut oil, coconuts, cassava chips, dried fruits, etc. could all have potential. Instead of exporting these raw materials for processing in places like Indonesia or Hawaii, the farmers could retain some of the value through small-scale processing centers in the rural villages.
Our second hypothesis is through improving market linkages within the country. We noticed that the supermarkets in Dili lack fresh produce. One CEO told us that in fact he only has 30% of the quantity that he needs. Through scale efficiencies, the market could be improved. The challenge for the supermarket is building the relationships needed with farmers to create a consistent supply chain. Our client, World Vision is uniquely positioned due to already having established these relationships and having proven success through agriculture education in the past. Writing a business plan that could help World Vision get a grant that would allow them to dedicate resources to this project could help build linkages required for farmers to sell their goods quickly and for good prices.
I’m hopeful that our final project deliverables will be something useful for World Vision. This organization does make a huge difference in the communities in which they work in. It is my hope that we might be successful in equipping them with something that they can use to serve the farmers in these rural villages. It is my hope that we can give back even a fraction of what they have given us through our in-country experience.