World Bank-East Timor Partnership

School Girls in Oecusse, East Timor. Education is one of the sectors the World Bank is prioritizing in its current partnership strategy with East Timor. Photo by: Barbara Ratusznik / World Bank / CC BY-NC-ND Following years of violence and insecurity, East Timor is steadily becoming a model for post-conflict development. Dili is home to the Secretariat of the g7+ — a voluntary group of post-conflict countries — and Minister of Finance Emilia Pires currently chairs the group as well. Not surprisingly, East Timor plays a big role in the development and implementation of the New Deal for Engagement in Fragile States, which provides a framework for providing aid to the world’s most fragile states. In addition, Dili’s economy has expanded considerably, growing by an average 11 percent annually since 2007. In the Asian Development Bank’s latest outlook report for developing Asia, East Timor’s economy is forecast to grow 8.5 percent in 2014 and 2015. While projected growth is slightly slower, Dili still has one of the fastest-improving economies in the Pacific. More importantly, official development assistance is no longer the main source of government spending. Withdrawals from the Petroleum Fund — a sovereign wealth fund created to manage East Timor’s oil revenues — now finances much of public expenditure. But this overreliance on oil revenues makes for an unsustainable economic model. Given current extraction rates, Dili’s oil reserves may not last beyond 2025. Further, petroleum-fueled economic expansion has not effected inclusive and sustainable growth. Half of the population continues to live below the poverty line, the quality of education remains low, unemployment rates are high and health services are still poor. To address these challenges, the government of East Timor laid out a Strategic Development Plan for 2011-2030, which aims to reduce extreme poverty, diversify Dili’s economy and achieve upper-middle-income status by 2030. The World Bank’s country partnership strategy for fiscal 2013-2017 is fully aligned with the SDP, but will also focus on strengthening public institutions to enable better social services delivery and more effective management of the country’s natural resources, especially its finite oil reserves. Funding levels The current strategy is the first time the World Bank will be implementing a blend of International Development Assistance grants and International Bank for Reconstruction and Development loans in East Timor. In the past, the bank provided development assistance mainly by way of IDA credits and trust funds. For the past five years, East Timor has received $25.4 million and $63.96 million in IDA grants and trust funds, respectively. For this funding period, indicative allocations are $50 million in IDA grants and $54 million to $60 million in IBRD loans. In addition, through the International Finance Corp., the bank will facilitate public-private partnerships in support of government efforts to improve the business environment. The World Bank will be providing PPP design and management, and other infrastructure financing advisory services as well. As East Timor is still transitioning out of fragility, the bank will be flexible in its financing arrangements and will consider tapping the Immediate Response Mechanism and Crisis Response Window for additional IDA credits. Funding priorities Under CPS 2013-2017, the bank will work around three strategic areas: 1. Better social protection, and management and delivery of education, health and nutrition services. 2. Core infrastructure connecting communities to markets. 3. Diversified economy. Strengthening public institutions for efficient and inclusive service delivery is a cross-cutting goal. Youth and gender issues will inform all programs as well. Below are IDA and Trust Fund disbursements per sector for 2010-2013. The highest-funded projects the bank is currently implementing include: Road Climate Resilience Project ($20 million) — The project intends to provide climate-resilient road infrastructure to beneficiary communities on road links and facilitate natural disaster response efforts. Road Climate Resilience Project – Additional Financing ($40 million) — The additional financing supports the scale up of the project associated with upgrading the entire Dili-Ainaro road through the rehabilitation of the entire corridor. Health Sector Strategic Plan Support – Additional Financing ($17.7 million) — The objective of the project is to improve the quality and coverage of preventive and curative health services, particularly for women and children, in order to accelerate progress toward health-related Millennium Development Goals. Devex analysis In response to East Timor’s growing economy — largely an effect of strong oil revenues and limited debt — donor agencies have been reducing aid allocations to Dili. Contributions to the bank-managed multidonor trust fund have been declining as well. Admittedly, IDA and IBRD allocations for East Timor will fund only a small number of projects. But while this is in line with the trend for reduced donor funding, it also reflects the bank’s focus on providing more knowledge-based support, which is crucial to strengthening the capacity of public institutions in Dili. To help East Timor reduce its reliance on oil and diversify its economy, the World Bank will help the government establish the “building blocks” and facilitate catalytic investments in key sectors, including in agriculture. The World Bank is also closely coordinating with development partners to ensure that critical areas of development are adequately supported. Contact World Bank Country Office in East Timor Tel: (670) 331-2367 Email: