10 Basic Things to Know before Doing Business in Timor Leste

Doing business in Timor Leste will be a challenging but profitable issue. Nowadays, many expats(there’s a facebook group named Dili Expats) are living and working in Timor Leste. Some of them are working with the Timorese government, some are working with NGOs, some are working with private sectors, and some are elbowing, maintaining, expanding, and doing business in Timor Leste. In this article, I will guide you through everything before you decide to start a business or invest in Timor Leste. Please refer to this article with the tile of 10 basic things to know before doing business in Timor Leste.

Timor Leste or East Timor?

Timor is a small island at the southern end of Maritime Southeast Asia and in the north of the Timor Sea. The island is divided between the sovereign states of East Timor on the eastern part and Indonesia on the western part. Leste is a Portuguese name for the word of the east in English. They’re just different names, but they’re talking about the same country.

Social and Cultural Environment of Timor Leste

I’ll briefly introduce the social and cultural environment in Timor Leste because it is an important part of those who are and plan to do business in Timor Leste.

Internal Structure

There’s almost 78% aboriginal people of the total population, and they’re mostly the hybrid of Polynesians, Malayans, and Papuans. Meanwhile, Indonesians account for about 20% and Chinese for 2%. So even this is not so important, you’d better know the basic population structure before doing business in Timor Leste.

Language

the official languages of Timor Leste are Tetun(Tetum in Portuguese) and Portuguese. And the working languages are Bahasa Indonesian and English. Based on my work experience in Timor Leste, only the well-educated groups can speak fluent Portuguese and English, but most of them can understand Bahasa Indonesia as well. It is no doubt that everyone can understand Tetun. There’s already a dictionary named Tetun Finder(you can download the dictionary from here) and it is mainly the vocabulary between English and Tetun.

Religion

Doing business in Timor Leste has to take the religion into account, for on religious holidays, the workers usually are off work.

About 91.4% of Timorese believe in Catholicism, 2.6% believe in Christianism, 1.7% believe in Muslim, and the rest believe in Buddhism and Hinduism.

Market Overview of Timor Leste

Timor Leste is a newly established small nation with a majority of poverty-stricken areas, a lower proportion of citizen education, high-level of unemployment. But it is one of the most rapidly developing nations with its main source of revenue depending on oil and gas.

Private industries are developing slowly due to human power shortage and of course top-notch talents. At the same time, the official rules and regulations are incomplete. Moreover, the basic infrastructure is still inadequate. Many huge projects are all based on the government’s will.

Challenges and Opportunities in Doing Business in Timor Leste

the legal environment of Timor Leste is complicated by blending Portuguese laws, Indonesian laws, and post-independence regulations. A primary barrier to foreigners and Timorese themselves is lacking definite property laws, no matter on real or intellectual.

In terms of challenges, probably the most significant one is the political surge, especially during the presidential election campaigns.

the opportunities are also obvious that the infrastructure of East Timor is pending improve. What’s more, the Timorese government is planning to spend more on infrastructure in a few years to come.

Agriculture is also a promising industry if you plan to invest in Timor Leste. the most promising produces should be coffee, coconuts, beans, corn, sweet potatoes, peanuts, etc.

The finishing industry is also undeveloped, despite that it has plenty of marine resources. Thus, the processing of marine produces has huge market potential.

At last, let’s take a look at its tourism. Tourism is based on the development of the primary industry and secondary industry. But nowadays, the said two still have a long way to go. But, we have to admit that Timor Leste has huge natural resources in terms of tourism. Green mountains, nice beaches, blue sky, fantastic diving position, and natural animals are laying the foundation of developing tourism in Timor Leste.

As a matter of fact, besides the oil and gas industry, the government of Timor Leste is always seeking to develop its tourism industry. You can also check online to read the travel journals online, or you can visit the official website of Timor Leste to get to know the tourism matters of East Timor.

Market Entry Strategies

There is almost no professional market research and consulting organizations or companies in Timor Leste. Thus, personal connections and relationships are still the keys to elbow the Timorese market. That is to say, constantly contacting locals helps you understand more about doing business in Timor Leste. Moreover, local partners can help you bid on governmental projects and get huge contracts. If you have connections in Timor Leste, that is good. But what if you don’t have such relations?

Here listed some ways that you can take advantage of.

• Visit the governmental and official websites and contact the authority.
• Try to contact local official media and news agencies.
• Keep sharp about news on TradeInvest Timor Leste
• Keep contacts with existed companies in Timor Leste. For instance, a company has already got a bid from the Timorese government, why don’t you be the sub-contractor?
• Take a closer look at Timorese who has already completed the study in overseas countries on Facebook. Most of them are from high-rank families, if possible, their parents work in government.
• Try to contact personnel working in Timor Leste. They maybe work with NGOs or work as a volunteer professor, or as an entrepreneur in Timor Leste.
• Come to Timor Leste and investigate by yourself.
• Visit the website of the embassy of your own country or directly pay a visit to it.

Financial environment determines the profit in doing business in Timor Leste

In the financial section, I will go through local currency, foreign exchange management, banking and insurance, financing and credit cards.

Local Currency — A Must-know before Doing Business in Timor Leste

currency in Timor Leste is USD. Meanwhile, the central bank in Timor Leste issues local coins equivalent to the value with USD. the payment method is mainly by cash.

Forex Management — A Must-know before Doing Business in Timor Leste

there are no official forex regulations in Timor Leste, and forex can be remitted freely. All the commercial banks with supervision from the central bank have to report when there are huge amounts of funding exceeding a certain amount of money. This is to crack the money laundry crimes. Foreigners with over 5,000 cash have to report to the customs when going out or coming in. When the cash is over 10,000, then the money carrier has to get a clear authorization.

Banking and Insurance

There’re 4 foreign banks, 9 money remitting providers, 2 forex exchange centers, 2 insurance companies, 1 national commercial bank(BNCTL) and the central bank(BCTL) in Timor Leste.

If any foreign enterprise intends to do business in Timor Leste, then it needs the following documents and procedures:

• 2 randomly valid certificates from company-registering documents, working visa, passport, local driving license.
• letter of application of local bank accounts
• verification on-scene by the legal person with a valid signature

Financing

there’s no condition for financing a huge amount of funds. because there’re so many bad loans, local banks, and foreign-funded banks don’t usually offer financing services. Moreover, the banks have to go through the credibility with a rating system. Plus, the banks have to take other factors into account.

Thus, financing is impossible. But it is not to say you can’t get any financial support from local banks.

Credit Cards

In most high-level restaurants, hotels, and supermarkets, Visa cards and Mastercards are available. Some of these service providers can even accept payments by Unionpay cards (a payment way within China).

To see which service providers accept credit cards, please check the details of the providers on Timorlestelist.

Major Taxes in Timor Leste

the government of Timor Leste reformed the tax system in 2018. This is to spur the development of the domestic economy, promote foreign investment, boost the growth of the private economy. Let’s dive into its tax system, especially to foreigners.

Tax and Tax Rate

Service Tax — the industries that business owners need to pay tax service tax include hotels, restaurants, bars, and telecommunication sectors. the new tax rate is 5%. If the total invoice is lower than 500 USD per month, then the business owners don’t need to pay such a tax.

Excise Tax

some goods need to import from overseas countries, please kindly take a look at the following items. These items have different tax levels.

• Beer needs to pay 1.9 USD per liter.
• wine and other similar beverages need to pay 2.5 USD per liter.
• Alcohol-types need to pay 8.9 USD per liter.
• Tobacco and cigarettes need to pay 19 USD per kg.
• cigarette lighters need to pay 12%.

Sales Tax

sales tax covers goods imported to and sold in Timor Leste. the tax rate for imported goods is 2.5% and tax for goods sold in Timor Leste is 0%.

Import Duty

the import duty accounts for 2.5% of the value of the goods. Following imported items don’t have to pay tax.

• 200 cigarettes; 2.5-liter consumption drinks; personal items with the value under 300 USD
• diplomatic goods, UN goods, and the goods for special organizations have exempt tax

Preferential Policies to Foreign Investors

to better introduce foreign funds and investment, the government of Timor Leste issues series of preferential policies to decrease the taxes. Investing in different areas can get free land for several years. Meanwhile, hiring a local worker can also cut the taxes paying to the government.

Exempt Customs and Business Tax List

• capital commodities and various pieces of equipment
• raw materials in the manufacturing industry
• semi-produced goods
• components and parts used to reproduce goods or provide services
• providing electricity-generation fuel(except oil) to those companies without a supply of normal electricity

Free of Tax

some of the state-owned land and properties are free of taxes. Please check the following types out.

• projects in rural areas are free of taxes for 7 to 12 years.
• projects in Oecussi and Atauro are exempt of taxes for 9 to 15 years.

Cost of Doing Business in Timor Leste

In terms of the cost of doing business in Timor Leste, I will list prices and costs for daily consumption such as water, electricity, gas, labor cost, house, and property(Please find it the category of house & property on Timorlestelist) prices, construction materials and more. So let’s dive in one by one.

Daily Cost of Doing business in Timor Leste

daily cost of doing business in Timor Leste mainly covers costs of water, gas, and electricity. let’s take a look one by one.

• it is 1.2 dollars per ton of water in Timor Leste. But the municipal water supply is limited, most of the companies have to dig wells on their own to get water. Thus, digging wells is a business you can take into consideration.
• it is 0.12 USD per degree of electricity for household usage. If the electricity is used for industries, then there’s the escalation system of charging power fees. It is 0.15 USD for power consumption between 0–1000 degree, 0.2 USD for consumption between 1000–3600, and 0.24 USD for consumption above 3600 degrees.
• there’re no gas pipes in Timor Leste, thus you can buy gas cylinders. It is 150 USD for a 45kg cylinder.

Labor Cost

the unemployment rate in Timor Leste is comparatively high. the source of labor is adequate but most of the labors lack techniques and skills, so they can take some physical work, let’s say, construction and fabrication.

the minimum salary based on local law is 115 USD per month, but in most cases, local labors can get 5–7 USD per day. you need to pay double during vacations and national holidays. And the payment for extra work is 50% more based on the daily salary.

Many foreign-funded enterprises can get preferential taxation policies based on local law. Foreign-funded enterprise can get 300 USD’s deduction of tax as long as it hires a local and official employee. But because of lacking professional techniques and skills, most of the foreign-funded enterprises have to hire employees from their mother countries.

Land and House

Due to diverse geo-location, the price of land and house is also varied. It is very common to hire apartments for foreigners. It usually costs 600–1500 USD to rent an apartment containing multiple rooms. As the land and house rental booming, the need for renting a local business-exclusive building is also increasing.

Construction Material and Related Items

Most of the construction materials need to be imported in Timor Leste, except sand and stones. Let’s take a look at the pricing (USD) of raw materials. Note: CLDR stands for the cylinder.

ItemCementRiver SandGravelOxygenEthyneArgonPrice6$/40kg25$/m³⁴⁵$/m³⁵⁰$/CLDR70$/CLDR80$/CLDR

Let’s view the cost of renting pieces of equipment. You will get an overview of the basic cost of machines and heavy equipments.

ItemExcavatorTow TruckDumperRoad RollerLand LevellerPrice500$/day120$/trip300$/day500$/day550$/day

The price of renting different pieces of equipment varies in Dili and other cities and counties. The pricing will consider the freight distance.

Transportation determines the efficiency of doing business in Timor Leste

When we talk about transportation, we usually refer to high ways, railways, airlines, and water carriage. Let’s take a look at all these ways of transportation.

High way in Timor Leste

the infrastructure of Timor Leste is not good, but the government is improving this situation. There’re a total of around 6,000 kilometers of high ways. Only 8% of the high ways are in good condition. But in 2015, a state-owned enterprise in China starts to undertake the building of high ways in the western province of Covalima. It’s already completed its building. The Chinese state-owned enterprise is going to build another highway in Viqueque(find different service providers in Viqueque by clicking here).

Railways in Timor Leste

At present, there are no railways in Timor Leste. Meanwhile, it seems that the government of Timor Leste doesn’t have a plan to build railways.

Airlines in Timor Leste

Timor Leste covers 3 first-degree airports and 5 second-degree airports with Dili Airport, the sole international airport. Dili Airport is located in the northeast of Dili(find more service providers here), the capital of Timor Leste. Air Timor S.A., founded in 2008, is the sole airline company run in Timor Leste. There’re also airlines between Dili, Bali in Indonesia, Singapore and Darwin in Australia.

Based on the nationalities of overseas travelers to Timor Leste, they’re Indonesians, Australians, Portuguese, Chinese, and Philippians in the descending order.

Sea transport in Timor Leste

the longest sea line is from Dili to Ocussee with 2 times a week. This line is run with the allowances from the Timor Leste government and the vessel is donated by the German government.

Dili port is a deep-water port, the sole container port, with its throughput around 42,000 standard boxes and dumping around 0.25 million tons of goods every year. Most of the goods are imported rather than exported. Meanwhile, the boats between Dili and Atauro, along with boats from Dili to Oecussi (the city close to Indonesia most).

As the development of the Timorese economy, Dili Port has barely met the requirements of usage, due to its natural conditions. Thus, its government decides to build a new port Tibar. This new port is about 15 kilometers from Dili, exclusively for cargo’s output and input. While Dili Port will be used as tourism and passenger shuttle.

Internet in Timor Leste

There’re 3 telecommunication carriers. the most famous provider is Timor Telecom. It is founded in 2002, covering mobile services, internet services and telephone calls with a comparatively high rate. It covers about 92% of the base stations and 64 3G’s base stations. There’re also Telkomcel and Telemor as well.

If you want to elbow in the market of Timor Leste, you’d better subscribe to a package — a package including preferential items, such as unlimited SMS, sufficient traffic in the daytime and unlimited traffic during nights.

Electricity Consumption Playing an Important Role in Doing Business in Timor Leste

Doing business in Timor Leste needs a power supply and power supply is also critical to all business in Timor Leste. the electricity consumption rate in major cities is almost 100%. But due to the comparatively extreme natural conditions, the power supply is not stable in Timor Leste. CNI22, a Chinese state-owned enterprise has already taken over the power project and run it for about 10 years. There’re 2 power plants in Hera and Betano respectively.

Due to the rare heavy industries, the power supply exceeds the demands of electricity in Timor Leste. Small businesses and households are the most commonly seen power users.

E-Commerce in Timor Leste

Compared with the booming e-commerce in countries surrounding, the same industry in Timor Leste is already lagging. There’re already Shopee, Lazada and other e-commerce platforms in Indonesia, Thailand, Singapore. But right now, the websites and apps are still countable with only 2 hands. Moreover, the number of e-commerce apps is declining from 2013 to 2015. E-Commerce will be a promising industry in Timor Leste, but with few years to foster.

On one hand, the e-commerce within Timor Leste is restrained by natural defects like the poor internet, traffic, warehouses, and logistics. One the other hand, there’re few e-commerce talents and web talents here, not mentioning the expensive cost of investment in technical facilities. It’s time-consuming to invest e-commerce in Timor Leste and start to earn consecutively. But if you can afford costs within 5 years in Timor Leste, or if better, you can undertake huge internet projects from the government, then your business in Timor Leste will grow.

Under such circumstances, it is too hard to find a job if you work in the e-commerce industry in Timor Leste. But there’s a job portal for foreigners to find jobs in Timor Leste — Vagas. You can click and check this website and find the updated recruiting information in Timor Leste.

Conclusion

Doing business in Timor Leste is challenging but profitable. But with proper ways and right business partners, you can try your luck. Please always remember, if you’ve already been doing business in Timor Leste, Timorlestelist is always one of the best ways to promote your business and gain a reputation. It is very simple. You can click the add listing button on the homepage and fill in your business information. The SEO will be left to the Admin.