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The External Investment Regime in Timor-Leste

The External Investment Regime in Timor-Leste. TIMOR-LESTE: in brief and economic growth 2010. Size of Country: 15,00 0 km2. Population: 1.1M Currency: USD GDP: $ 637 M G DP per capita: $ 637 Imports: $ 430 M Exports: $ 59 M Inflation Rate: 7 . 4 %

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The External Investment Regime in Timor-Leste

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  1. The External Investment Regime in Timor-Leste

  2. TIMOR-LESTE:in brief and economic growth 2010 • Size of Country: 15,000km2. • Population: 1.1M • Currency: USD • GDP: $637M • GDP per capita: $637 • Imports: $430M • Exports: $59M • Inflation Rate: 7.4% • Petroleum Fund Balance (October 2010): US$ 6.592billion • Everage oil and gas revenues in 2010: US$ 150 million • Economic growth 2010: 12% • Reduction Poverty: 9%

  3. Timor-Leste major reforms have fostered a better climate for private investment • 2008: A new tax law came into force, transforming the tax regime for business. The profit tax rate was reduced from 30% to 10%. Corporate income tax now paid in quartertly rather than monthly installments when turnover is less than 1million. Due to these reforms, the new tax regime was recognized in the World Bank doing business report 2009 as one of the top twenty in the world, moving from ranking of 75 to ranking 19 in the one year. • 2008: the gov’t also successfully introduced decentralization of procurement to line Ministeries, ensuring more effective and efficient budget management. • 2010: the council of minister approved the private investment law that future will replace the external investment law.

  4. National strategic development plan • The gov’t is currently working on a national strategic development plan to 2030 which includes a public investment strategy cross sectors. The strategy is aimed at establishing best practices which will render maximum returns and fosters the conditions to stimulate the non-oil economy and encourage private sector growth. The national strategic development plan 2011-2030 to be presented this year will be the guiding document that will bring Timor-Leste from a low income country to an upper middle income country by 2030.

  5. TIMOR-LESTE:Principles of the Economic Development Strategy • Promote an open economy based on competitiveness • Create a market economy led by the private sector • Develop a business-friendly environment • Stimulate the development of an export-led economy • Promote capacity building of the private sector • Create attractive investment opportunities for domestic as well as external investors • Stimulate the development of economic infrastructure • Promote the creation of sustainable employment • Improve the quality of life of the people • Contribute significantly to reduction of poverty in the country

  6. TIMOR-LESTE:Basic Principles of the Private Investment Policy • Promote an investment strategy led by the private sector as the engine of economic growth • Stimulate investment in the entire country, particularly in rural areas, and especially in the District of Oe-Cussi and the sub-District of Ataúro • Accord special attention to investments directed at the export market and economic infrastructure • Offer investment guarantees based on international best practices • Adopt a package of competitive investment incentives • Encourage voluntary joint-venture initiatives based on mutual business interests of domesitic and external investors • Promote the integration of small and medium enterprises (SMEs) in the supply chain of external investment ventures

  7. The Investment Regime in Timor-Leste General Legislation Specific Legislation

  8. Specific Investment Legislation in Timor-Leste Petroleum Sector Legislation (Mineral Resources Legislation) Investment Legislation in Other Sectors

  9. Specific Investment Legislation:Equal Treatment of All Investors Law No. 4/2005 on Domestic Investment Law No.5/2005 on External Investment

  10. Law on External Investment No. 5/2005:Objective of the Law • With Law No. 5/2005 the State of RDTL intends to create a legal framework to attract and retain foreign direct investment into the country. The purpose is to promote the development of the country’s natural and human resources, create sustained employment and contribute to the economic and social development of Timor-Leste. The ultimate aim is to contribute significantly to the improvement of the living conditions of the population and the reduction of poverty in the country.

  11. Law on External Investment No. 5/2005:Means of External Investment, Article No. 6 • Currency transferred from abroad and deposited in a legal financial institution in Timor-Leste; • Import of assets, services and rights with funds originating from overseas; • Dividends generated by an external investment and reinvested in the same business unit; • Granting of rights for technology and trademark use.

  12. Law on External Investment No. 5/2005:Conditions and Guarantees • Access to all sectors of the economy under the laws of Timor-Leste • Minimum amount required for external investment is $100,000 USD • Guarantee of the rights to private property • Legal guarantee against nationalization; expropriation only under the law and for general public purpose with fair and prompt compensation • Equal treatment of all investors • Rights to repatriate profits and proceeds derived from an external investment • Right to contract skilled foreign worker • Right to transfer assets freely • Access to foreign currency • Mediation as the preferred form of conflict resolution • Option for arbitration in dispute resolution between the State of RDTL and the foreign investor under ICSID rules

  13. Law on External Investment No. 5/2005:Corporate Income Tax Incentives, Article No. 14 • Tax credit of $300 for each Timorese worker working on a regular full time basis according to the location and type of external investment as follows: • Urban areas for a period of 5 years • Rural areas for a period of 7 years • Oe-Cussi and Ataúro for a period of 10 years • Where the external investment is made in economic infrastructure: • Urban areas for a period of 10 years • Rural areas for a period of 12 years • Oe-Cussi and Ataúro for a period of 15 years • Where the external investment is focused mainly on export: • Urban areas for a period of 7 years • Rural areas for a period of 9 years • Oe-Cussi and Ataúro for a period of 12 years

  14. Law on External Investment No. 5/2005:Customs Incentivos, Article No. 15 • Exemption in the payment of Customs duties and taxes on: • Capital goods • Materials for construction of industrial and hotel buildings • Raw materials for manufacturing • Semi-finished goods • Components and spare parts for incorporation or use in the production of goods and services • Fuel (except gasoline) used to produce electricity for utilization in the foreign investment business unit

  15. Law on External Investment No. 5/2005:Lease Exemptions – Article No. 17 • State land and property in rural areas: • Exemption from lease payment for a period of 7 years on investments in rural areas • Exemption from lease payment for a period of 10 years on investments in Oe-Cussi and Ataúro

  16. Institute for Promotion of External Investmentand Export- TradeInvest Timor-Leste - The “One-Stop-Shop” for the external investor and the national exporter

  17. External Investment Processing: The Future (One-Stop-Shop & Investment Commission) Permanent Members Ad Hoc Members Investment Commission Investment Commission Land & Prop Customs Sector A: Trade Ext Invest Commission TradeInvest Timor-Leste (One-Stop-Shop) Environment Investor Entry Sector B: Tourism TradeInvest Sector C: Fisheries Etc… Tax Depart. Emigration Labor

  18. Law on External Investment No. 5/2005:Obrigations of the External Investor, Article No. 22 • Comply with the laws, regulations and rules in Timor-Leste; • Employ Timorese workers and promote their vocational training and technical skills required to perform supervisory and managerial functions; • Implement rules and procedures regarding the protection of the environment, health and safety at the work place under the terms of applicable legislation; • Comply with the rules and procedures of applicable legislation which govern transfer of funds; • Regularly provide TradeInvest Timor-Leste with information and data related to the external investment operation.

  19. Commencement of Implementation of Foreign Investment (Government Decree N. 6/2005 27th of July) 1) Effective implementation of foreign investment that has been authorized within the framework of the present regulation, is the responsibility of the investors or their proxies, and must start within 180 days, unless another timeframe is established in the permit, from the date the investor is notified of the decision on his application. 2) The entity which has approved the application for foreign investment permit, can, for necessary reasons, extend the period referred to in the previous number for an additional period of 90 days, if the permit holder requests an extension before expiry of the mentioned period.

  20. TIMOR-LESTE:Areas Of Investment Opportunities • Oil and Gas • Mineral Resources • Agriculture and Agro-industry • Forestry • Fisheries • Tourism • Industry • Economic Infrastructure

  21. Thank You Terima kasih Obrigado Barak! TradeInvest Timor-Leste

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