Catching-Up from Way Behind: How Timor-Leste Can Avoid the Dutch Disease?

This paper seeks to analyse the capacity of the newly independent but petroleum rich Timor-Leste to avoid experiencing the “Dutch Disease”. The historical and social circumstances of Timor-Leste has left the resource-rich country with serious challenges to break out from the resource curse with the incidence of poverty rising over the last decade and the social indicators of child mortality rates and life expectancy falling very slowly. The evidence shows that Timor-Leste is facing mounting obstacles as oil and gas, which has contributed little to direct employment, continues to dominate GDP, with cereal yields from the agricultural sector showing a trend fall over the last decade. The paper offers policy recommendations to assist the government in its efforts to bolster the non-petroleum sectors through technological capability building targeted at the productive sectors of agriculture and manufacturing in order to avoid the resource curse.