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SUBMISSION: “The Proposal of Project of Law No. 2/III/ (Ia) General State Budget 2013” 05 August 2013

Your Exelency:

The President of D Commission – Commission of Economic and Development

Members of D Commission of National Parliament

Deputies of RDTL National Parliament





1. Economic Growth

Economic growth is the comparison of real economic activity (Gross Domestic Product/ GDP) from year to year. GDP variabel are like;  domestic consumption, investment, state expenditures as well as export and import values. Based on these variables, we conclude that economic has growth tremendeously since public/state  expenditure also increase simultaneously.  Within Timor Leste context, consumption and expenditure have been increased since 2006 untill 2012, around 57.4% or beyond $3,244 million, which mostly allocated toward salary, good and Service, capital minor (to purchase cars, motorcycle, and generators) and transfer. Such number is higher than invenstment and export value (expenditure toward capital, infrastructure).



Within State Budget 2012 and 2013, State expenditures has reached 50%, equal with capital expinduture which also 50%. In the meantime, there isn’t equilibrium with export value and domestic investment. Therefore, state expenditure become as dominant factor to contribute toward economic growth in Timor Leste.



According to GDP variabels, economic growth has been increased two digit, however economic foundation still weak and unsustainable. Therefore, when state account become limited (for example: Petroleum Fund has ran out), this could generated financial and economic crisis since domestic tax still hasn’t been able to give significant contribution. Every year, domestic tax can only contributes around 8-10% toward the country, for example, in 2013 domestic tax can only give 8% toward State Budget.  Such number itself hasn’t been able to support expenditure within category of salary and service.



Table 1: The comparison of Economic Growth in Timor Leste and other Countries.































































Timor Leste*






Source: Book 1, p.14 State Budget Proposal 2013.



The table has shown that if compared with other nations within Asia Pasific region; Timor-Leste becomes as unique country since its economic growth is high and has reached to 10.4% in 2013. However, this doesn’t signify that people’s life and economic condition in Timor Leste is better than such nations. Other nations within Asia Pasific region have small of economic growth in average, however they have already firm of economic foundation. Actually, Timor-Leste can be proud with such progress whenever such succeed is along with adequate of economic activities. Unfortunately, as Luta Hamutuk analyzed that economic growth  hasn’t been able to reflect on real condition since people are still struglled with problems within daily basis.


We should take precaution action, otherwise import value will higher than local production signify that this will generate severe inflation. For example, economic growth in 2012 has reached 10.6%, however inflation rate was increased as well and up to 11.7%. Based on such fact, inflation calculation should to consider in measuring economic growth. The question is now; Are we still proud with such huge of economic growth?



Such Economic Growth phenomenon is called “catch-up effect,” where ones country has became significantly increase its economic growth within short of period comparred with wealthy country. Within poor condition, no matther the number of money is, particularly in Timor Leste where State Budget is huge, simply expendite such budget will automatically caused economic growth. In other sinism words, the government needs no efforts in order to increase its economic development, just simply expendite the budget and the results will be huge.



Luta Hamutuk conciders that economic growth which is based on Macro economic indicators is important. However, micro economic indicator should to include as well in measuring domestic economy activity. Economic growth doesn’t guarantee that this will give significant impacts toward people’s life, particularly when sectors which support economy activity do not well developed. Such sectors for example; domestic production, manufacture and small-medium entrepreneurs.  The caused from such negligence are like the decrase of local production, high dependency with import goods and activity, the increasing number of unemployee, the increasing of basic good price and unfair  distribution of money.


2. Job Field

The rare of job field is also correlated with GDP structure in Timor Leste, since there isn’t any real investment to develop such field. During 7 years of governance (2006-2012), capital expenditure has reached US$2,382 million (42%), however this hasn’t been able to absorp workers since most of jobs are using machines instead of human efforts. The other challenge is inadequate of infrastructures, therefore couldn’t attract foreign investors.


Luta Hamutuk asks National Parliament aimed to insist government, therefore presenting new data of unemployed number to be used in identifying real condition of such problem, rather than use data within Labour Force Survey 2010, which do not relevant anymore with the condition during the past 3 years. The government has presented that there are around 9,000 unemployed, mostly youth, signify that 3% of youth are jobless. Based on such data, the solution should be easy and could have been done years ago begin in 2011, since started at that time State Budget were huge and beyond $1 billion.



3. Inflation

Inflation tax is correlated with money which circulating within the country. Within Timor Leste context, inflation has reached 11.7% in 2012, similar with the condition when UNO governed this country. Back then, huge of money was entering the country and there wasn’t any monetery institute which control such money growth. Finally, IMF had pointed to take such responsibility and to introduce as well US Dollar in order to neutralize inflation. 


Nowadays, Central Bank is an institute which has responsibility to control money growth, money circulation as well as create monetary policy to reduce inflation. Money value will reduce when market is able to absorp consumers (people has capacity to afford). However, we all knew that most of Timorense have minimum capacity to afford certain goods within market.  Luta Hamutuk thinks that, fiscal policy is needed to resolve inflation, particularly in 2013 where inflation rate has been predicted to be up to 7.6%. Monetary Political is also needed to create balance with fiscal policy. Though government hasn’t have model of monetary political of its own, however through Central Bank they can create framework toward account interest within bank, therefore create conducive situation toward communities as well as companies, in the mean time reduce certain groups where most money are circulating within.




The Proposal of State Budget 2013 has been already conveyed by V Constitutional Government toward National Parliament on 18 December 2012, stated that the total number is $1,797.5 million.  




Sub-total (US$million) 

Percentage/ % 


Petroleum Fund (RSE 3%)




Excess/ beyond RSE




Domestic Income




Government Interest/ Roll-over








Total (US$million) 




Based on that table, domestic income (tax and autonomy agency) has only contributed around 8.1% toward total of State expenditure. This signifies that, Timor-Leste hasn’t been able to expect from domestic income to support state expenditure, including category of salary and service where in 2013 its expenditure is up to $160.3 million (8.92%).


According to projection of income of State Budget 2013, we can predict the financial capacity of the country, particularly non-petroleum income which still hasn’t been able to respond on state necessities. In 2008, as tax law being decreed, the government promised that low tax will stimulate foreign investors and prices within local market will reduce as well. The realization of such promise actually will be able to increase domestic income therefore support some of state necessities. However, reality has shown that, after such decree toward tax law, foreign investors haven’t interested yet to conduct trading activity, in the meantime private sector still wait for governmen’t budget become as pasive client and prejudice domestic income.


In respect of income coming from domestic economy activity, public sectors as well as autonomy agency could anly contribute around 5%-10% every year toward State Budget. This is an indication that, Timor-Leste maintains to experience budget deficit 90%-95%, including such deficit in 2013 where the number is up to 91%, as well as deficit from loan estimated as US$43,6 million. Deficit signifies significant imbalance within domestic income which cause high dependency toward Petroleum Fund.


Based on Luta Hamutuk’s monitoring toward domestic income, it is obvious that there are many of public institution which can’t give contribution toward state income, tough huge of budget have been allocated toward these institutions by the government. Such Instituions namely; RTTL, Institute of General Equipment (less income since 2007-2010), Inspection of car importation and exportation of coffee and other agriculture product. In respect of domestic income (fiscal income), Luta Hamutuk question on export policy set by Ministry of Commersial and Industry, since to date Timor-Leste hasn’t have export tax though there are local products which have such potency to gain such income to be contributed toward State Budget. Therefore, we conclude that import tax has dominating and increasing each year, signifies that money has been wasted out of the country.






Total Allocation (US$milion)

Percentage/ %


Wages and Salary




Good and Service




Capital Minor




Capital Development




Public Transfer




Total expenditure (US$miliaun) 




According to the government, state expenditure 2013 is decreased to 0.5% if comparred with State Expenditure 2012. Such decrease is aimed to create fiscal sustainability and control inflation. The government also reduce infratructure expenditure to 10.8%, in the meantime increase rekurenti expenditure  to 17%.


Tough total expenditure has been decreased, however Proposal of State Budget 2013 has been increased to 17%, particularly within rekurenti expenditure, such allocation toward state functionaries. Luta Hamutuk ask for adequate fiscal policy which can promote efficiency within state expenditure, since this is the only way which could guarantee fiscal sustainability.






The execution of State Budget 2012, which has been published within Portal Transparansia, showed that execution is minimum. From total of Sate Budget 2012 estimated as $1,806.5 million, the government has only able to execute 66%. The remain (34%) will undergo roll-over in fiscal year 2013.


There is a slight different between saldu tezouru within State Budget execution 2012 ($443.8 million) with interest which presented by Ministry of Finance within State Budget Proposal 2013  ($409.8 million). The question is: where is the other $34 million of gap? The other point is that, money coming from obrigasoens and kompremisiu which estimated around $168.9 million do not mention within roll over of State Budget 2013. We concerns, as these budget do not register within government’s account, this will precipitate irregularity and being difficult to be controled. Actually, government’s interest which should be registered within State Budget Proposal 2013 is $612,787.8 million.


In respect to execution within ministries and state bodies, mostly have been able to achieve 70-90% in average. However, the execution of Infratructure Fund, which estimated as $875,13 million, could only realize 42%. The project Infrastructure Fund is considered as capital expenditure. Such Fund has close relation with people’s life, since infrastructure could give direct benefit toward them, therefore most of fund is directed to develop rural area. It is obvious that within infrastructure execution, government’s capacity is still insufficient. For example: the execution within urban and rural development project could only reached 1%, community housing (13%), clean water (0%), road (9%) and education (7%),


Clearly that, the implementation of state budget becomes as important factor in measuring money distribution/wellness and government’s dezenpenhu, therefore we could say that execution situation is weak and has minimize benefit should to bring toward people.


Luta Hamutuk also discovers that, execution report of State Budget ussually come up only with number, therefore without any explanation in respect of objectives should to realize based on annual ministerial plan. Such report also without indicators as a base to meassure its implication toward people’s life.


Luta Hamutuk ask National Parliament, to insist government aimed to present execution report based on ministerial objectives of its annual plan 2012 prior to debate in respect of State Budget 2013. Therefore, we can recognize as well as meassure the implication occurred from the implementation of fiscal year 2012, particularly toward people’s life.




1. To prioritize people’s basic interestau

The proposal of State Budget 2013 do not reflect significant allocation toward people’s basic necessities at daily basis.


This year the price of food is increasing simultaneously, people got severe from hunger and  clean water, in addition experience such difficult access toward road and electricity. These are problems which need to be put into priority and there is an obligation for the government to find solution immediately. We can’t just let the people wait within severe condition of mal-nutrition, mal-hygiene and poverty, while we knew that state income from oil and gas industry is continuously increaseing and almost reach US$11 mil million.


The state is rich and has huge of income, and during the past 5 years has taken beyond RSE 3% from Petroleum Fund. However, this  hasn’t been able to develop people’s life and resolve the root of certain problems, instead made people as slaves for its country leaders.



2. Hatu”ur Hikas Economic development

According to RDTL Constitution, article 138, it stated that “Timor Leste’s economy organization is part of liberate of communitary form which based on entrepreneur management has public and private sectors as well as social prosperity as means of production.”


In relation with economy organization, we suggest government to function economy structure within sectors stated within Constitution. In fact, public sectors have been handed by government toward private sector. In addition, the government hasn’t manage public sector as economic organization which will be able to give economic return in the future.


Furthermore, what kind of means of production based on RDTL Constituion article 138? We perceives that, agriculture sector is a means of production which reflect on 80% of people who live in rural area as farmers. However, reality has showed that, most of farm  soils have been abandoned, this sector is weak and its production is simultaneously decreasing. As primary sector (Book of State Budget Proposal 2013, No. 1, table, p19) agriculture production has been gradually decreased from 30.7% in 2006 to  21.6% in 2010.


In respect of Strategic Development Plan (PED), it is stated that there are 5 pilars of economic development:

-        Rural development.

-        Agriculture.

-        Petroleum.

-        Tourism.

-        Investment of private sector.


Luta Hamutuk notices that, such sectors should to include in meassuring economic growth, since these are considered as economic foundation where economic activity directed by RDTL Constitution and PED.


3. Agriculture Development

Within agriculture development PED had set ‘auto-sufficiency’ as an objective stated within PED’s plan as well as Plan of V Contitutional Government 2012-2017. We haven’t see any precise indication within Annual Plan of Ministry of Agriculture and Fishery (MAP),  MAP only explain about qualitative results, however without enclosing its indicator. However, quantitative results should to include as well within its explanation. For example, it only stated that there is a plan to purchase 270 ton of corn/rice/vegetables seed, without any explanation that these seed is directed toward 800 hectare of farm soils. Such explanation is important to be put into annual plan since it has relation with people’s income.


Back in Annual Plan of MAP 2012, what results have been made? In 2012, rice have been cultivated from 3,500 hectare of farm soil while corns have been cultivated from 2,000 hectare of  farm soil. Other data which should also being reported based on annual plan 2012 were missing, such as; where is the pile of cultivation being stocked, its distribution, etc therefore, we will be able to meassure the progress of agriculture production. We observe that budget proposal set by MAP was also without objectives and indicators. It only stated within Book No.1 page. 19, that primary sector has been simultaneously decreased. If such data being presented with sinism, then agriculture development become as a space to waste such of money.



4. Investment toward Petroleum Sector-Timor Sea Project

The objective of PED for period of 2011-2013 in respect of Timor sea project are to finish primary phase of abastesimentu platform in Suai, construct Maritime Port in Suai and rehabilitate airport of Suai.


In 2012, government had allocated budget estimated as $123 million, however fail to be executed and remove around $70 million within Ratified Budget 2012. As primary phase considered as fail, Ministry of Petroleum and Natural Resource defended that such phase was objected to conduct study and approach toward Suai Community. The question is that, what is the reason to ask another $17,474 million to conduct study/ supervizing concepts if such study has been done before?.


Investment toward Timor Sea hasn’t been able to show its economic return. We believe that meassuring economic return within petroleum development is a challenge if should to conduct within short term period. We should not continuously spent budget if there isn’t any advantage to be brought in the future, such money should to give back as a contribution to develop our beloved country.


Luta Hamutuk concerns with lack of capacity among MRMM, particularly to execute state budget. Within State Budget  2012, money had allocated toward Timor Sea project, however this considered as fail to execute, therefore underwent roll over within State Budget Proposal 2013. Such allocation estimated as $139.4 million, and  to be added around $37.9 million. As execution capacity still considered as inadequate, we ask National Parliament to conduct close observation toward expenditure of Timor sea Project and its implication in the future.



5. The Amount of State Budget OJE 2013 do not relect on government’s capacity

The execution of State Budget 2012 had shown that the governmen’t capacity still far from expectation, since it reached only 66%, while more money is planned to be taken in 2013.


Luta Hamutuk has analyzed actual execution in January 2013, infact the government can only execute $1,194 mil million (66%) from total of $1,807 mil million, still around $443.8 million (34%) should to execute by the government. Based on such data, signifies that State Budget 2013, estimated as $1,797.5 mil million, do not reflect on government’s capacity.


Luta Hamutuk notices that, State Budget 2013 still huge in number, seems like something outstanding is about to happen aimed to resolve people’s prolems. However, this need to be re-organized and discipline should to perform by ministries, therefore will be able to implement strategic project. In addition, synergic and integrated work is necessary, particularly with other ministries therefore able to realize state objectives. In the meantime coordination mechanism should also adequate, means conduct cooperation with local authorities within control process, welcoming those who’d like to access document of contracts and always in accord with Chief of Government’s direction, therefore maximize benefits toward people.


Thank You.


Dili: 18 January 2013



Joaozito Viana

Deputy Director

Team Coordinator of Budget Transparency Luta Hamutuk

Phone: (+670) 77243966